Employee Benefits

We work will all private insurance companies and health plans including Self Funded, Level Funded, and Fully Insured plans to find the best fit for your business.

These plans tend to be highly valued by employees, as the costs associated with dental and vision treatments, which are generally not covered by health insurance, can be quite high.

These policies generally provide employees' survivors a death benefit in a set amount or an amount based on salary (e.g., two times salary). This is typically a huge perk for employees with families.

Like other types of disability insurance, group disability insurance pays you a benefit that replaces part of your earned income when you're sick or injured and can no longer work. A group disability policy covers all eligible members of a group that has a common interest or association, and may offer special terms, conditions, and rates.

Short-term disability insurance plans generally pay benefits for several months, or occasionally as long as 2 years. In the case of employer-sponsored coverage, benefits often start once you exhaust your sick leave. Long-term disability insurance plans may pay benefits for several years, or until age 65, and may be coordinated with benefits from a short-term plan so that your disability coverage is continuous

• A retirement plan can have significant tax advantages:
• Your contributions are deductible when made
• Your contributions aren't taxed to an employee until distributed from the plan
• Money in the retirement program grows tax deferred (or, in the case of Roth accounts, potentially tax free)

Retirement plans are usually either IRA-based (like SEPs and SIMPLE IRAs) or "qualified" [like 401(k)s, profit-sharing plans, and defined benefit plans]. Qualified plans are generally more complicated and expensive to maintain than IRA-based plans because they have to comply with specific Internal Revenue Code and ERISA (the Employee Retirement Income Security Act of 1974) requirements in order to qualify for their tax benefits. Also, qualified plan assets must be held either in trust or by an insurance company. With IRA-based plans, your employees own (i.e., "vest" in) your contributions immediately. With qualified plans, you can generally require that your employees work a certain numbers of years before they vest.

Which plan is right for you?

With a dizzying array of retirement plans to choose from, each with unique advantages and disadvantages, you'll need to clearly define your goals before attempting to choose a plan. For example, do you want:

• To maximize the amount you can save for your own retirement?
• A plan funded by employer contributions? By employee contributions? Both?
• A plan that allows you and your employees to make pre-tax and/or Roth contributions?
• The flexibility to skip employer contributions in some years?
• A plan with lowest costs? Easiest administration?
• The answers to these questions can help guide you and your retirement professional to the plan (or combination of plans) most appropriate for you.

A SEP allows you to set up an IRA (a "SEP-IRA") for yourself and each of your eligible employees. You contribute a uniform percentage of pay for each employee, although you don't have to make contributions every year, offering you some flexibility when business conditions vary. For 2020, your contributions for each employee are limited to the lesser of 25% of pay or $57,000 (up from $56,000 in 2019). Most employers, including those who are self-employed, can establish a SEP.

SEPs have low start-up and operating costs and can be established using an easy two-page form. The plan must cover any employee aged 21 or older who has worked for you for three of the last five years and who earns $600 or more.

The SIMPLE IRA plan is available if you have 100 or fewer employees. Employees can elect to make pre-tax contributions in 2020 of up to $13,500 ($16,500 if age 50 or older; up from $13,000 and $16,000, respectively, in 2019). You must either match your employees' contributions dollar for dollar — up to 3% of each employee's compensation — or make a fixed contribution of 2% of compensation for each eligible employee. (The 3% match can be reduced to 1% in any two of five years.) Each employee who earned $5,000 or more in any two prior years, and who is expected to earn at least $5,000 in the current year, must be allowed to participate in the plan.

SIMPLE IRA plans are easy to set up. You fill out a short form to establish a plan and ensure that SIMPLE IRAs are set up for each employee. A financial institution can do much of the paperwork. Additionally, administrative costs are low.

Typically, only you, not your employees, contribute to a qualified profit-sharing plan. Your contributions are discretionary — there's usually no set amount you need to contribute each year, and you have the flexibility to contribute nothing at all in a given year if you so choose (although your contributions must be nondiscriminatory, and "substantial and recurring," for your plan to remain qualified). The plan must contain a formula for determining how your contributions are allocated among plan participants. A separate account is established for each participant that holds your contributions and any investment gains or losses. Generally, each employee with a year of service is eligible to participate (although you can require two years of service if your contributions are immediately vested). Contributions for any employee in 2020 can't exceed the lesser of $57,000 or 100% of the employee's compensation (up from $56,000 in 2019).

The 401(k) plan (technically, a qualified profit-sharing plan with a cash or deferred feature) is a popular retirement savings vehicle for small businesses. With a 401(k) plan, employees can make pre-tax and/or Roth contributions in 2020 of up to $19,500 of pay ($26,000 if age 50 or older; up from $19,000 and $25,000, respectively, in 2019). These deferrals go into a separate account for each employee and aren't taxed until distributed. Generally, each employee with a year of service must be allowed to contribute to the plan.

You can also make employer contributions to your 401(k) plan — either matching contributions or discretionary profit-sharing contributions. Combined employer and employee contributions for any employee in 2020 can't exceed the lesser of $57,000 (plus catch-up contributions of up to $6,500 if your employee is age 50 or older; up from $56,000 and $6,000, respectively, in 2019) or 100% of the employee's compensation. In general, each employee with a year of service is eligible to receive employer contributions, but you can require two years of service if your contributions are immediately vested.

401(k) plans are required to perform somewhat complicated testing each year to make sure benefits aren't disproportionately weighted toward higher paid employees. However, you don't have to perform discrimination testing if you adopt a "safe harbor" 401(k) plan. With a safe harbor 401(k) plan, you generally have to either match your employees' contributions (100% of employee deferrals up to 3% of compensation, and 50% of deferrals between 3% and 5% of compensation), or make a fixed contribution of 3% of compensation for all eligible employees, regardless of whether they contribute to the plan. Your contributions must be fully vested.

Another way to avoid discrimination testing is by adopting a SIMPLE 401(k) plan. These plans are similar to SIMPLE IRAs, but can also allow loans and Roth contributions. Because they're still qualified plans (and therefore more complicated than SIMPLE IRAs), and allow less deferrals than traditional 401(k)s, SIMPLE 401(k)s haven't become popular.

A defined benefit plan is a qualified retirement plan that guarantees your employees a specified level of benefits at retirement (for example, an annual benefit equal to 30% of final average pay). As the name suggests, it's the retirement benefit that's defined, not the level of contributions to the plan. In 2020, a defined benefit plan can provide an annual benefit of up to $230,000 (or 100% of pay if less), up from $225,000 in 2019. The services of an actuary are generally needed to determine the annual contributions that you must make to the plan to fund the promised benefit. Your contributions may vary from year to year, depending on the performance of plan investments and other factors.

In general, defined benefit plans are too costly and too complex for most small businesses. However, because they can provide the largest benefit of any retirement plan, and therefore allow the largest deductible employer contribution, defined benefit plans can be attractive to businesses that have a small group of highly compensated owners who are seeking to contribute as much money as possible on a tax-deferred basis.

A 403(b) plan is a retirement savings plan, sponsored by a tax-exempt organization or public school, that offers significant tax benefits while helping you plan for the future. You contribute to the plan via payroll deduction, which can make it easier for you to save for retirement. One important feature of a 403(b) plan is your ability to make pre-tax contributions to the plan. Pre-tax means that your contributions are deducted from your pay and transferred to the 403(b) plan before federal (and most state) income taxes are calculated. This reduces your current taxable income — you don't pay income taxes on the amount you contribute, or any investment gains on your contributions, until you receive payments from the plan.

You may also be able to make Roth contributions to your 403(b) plan. Roth 403(b) contributions are made on an after-tax basis, just like Roth IRA contributions. Unlike pre-tax contributions to a 403(b) plan, there's no up-front tax benefit — your contributions are deducted from your pay and transferred to the plan after taxes are calculated. But a distribution from your Roth 403(b) account is entirely free from federal income tax if the distribution is qualified. In general, a distribution is qualified only if it satisfies both of the following requirements:

• It's made after the end of a five-year waiting period
• The payment is made after you turn 59½, become disabled, or die

Generally, you can contribute up to $19,500 ($26,000 if you're age 50 or older) to a 403(b) plan in 2020 (unless your plan imposes lower limits). If your plan permits, and you have 15 or more years of service, you may also be able to make special catch-up contributions to the plan, in addition to the age 50 catch-up contribution.

If your plan allows Roth 403(b) contributions, you can split your contribution between pre-tax and Roth contributions any way you wish.

A Section 457(b) plan is a type of nonqualified deferred compensation plan that certain governmental and tax-exempt organizations can establish for their employees. Like other deferred compensation plans, the purpose of a Section 457(b) plan is to encourage employees to set aside funds for their retirement. Although it is a nonqualified plan, a Section 457(b) plan somewhat mimics a qualified plan in that it offers similar tax benefits for employees. These tax benefits generally include pre-tax salary-reduction contributions and tax-deferred growth of investment earnings.

Only certain governmental and tax-exempt organizations can establish and maintain a Section 457(b) plan. Governmental organizations that qualify include: (1) a state (including the District of Columbia), (2) a political subdivision of a state (e.g., a city or township), and (3) any agency or instrumentality of a state or of a political subdivision of a state (e.g., a school district or sewage authority). Tax-exempt organizations that qualify generally include any organization that is exempt from federal income tax, except for: (1) a church or synagogue, or (2) any organization controlled by a church or synagogue.

As an employer, you have an important role to play in helping America's workers save. Now is the time to look into retirement plan programs for you and your employees.

Companies set up a trust fund for employees and contribute either cash to buy company stock, contribute shares directly to the plan, or have the plan borrow money to buy shares. If the plan borrows money, the company makes contributions to the plan to enable it to repay the loan. Contributions to the plan are tax-deductible. Employees pay no tax on the contributions until they receive the stock when they leave or retire. They then either sell it on the market or back to the company. Provided that an ESOP owns 30% or more of company stock and the company is a C corporation, owners of a private firm selling to an ESOP can defer taxation on their gains by reinvesting in securities of other companies. S corporations can have ESOPs as well. Earnings attributable to the ESOP's ownership share in S corporations are not taxable.