Create a winning benefits package to stand out in a competitive job market
The job market continues to strengthen. This means more jobs competing for fewer workers, and employees looking for greener pastures. To stay competitive, you need to maintain a vibrant culture and competitive benefits – and that includes a retirement savings plan. According to the Transamerica Center’s 18th annual retirement survey, 88% of employees said a 401(k) or similar plan was somewhat to very important. And 81% of workers like the idea of automatic 401(k) plan enrollment. But only 22% of employers provide the latter feature because they think employees will be resistant. Quite a disconnect. But now that you’re armed with the truth, it’s time to explore your retirement plan options. What you find may surprise you.
First of all, some plans cost very little to set up and maintain. And nearly all plans offer tax deductions for contributions made by the business. So not only do you have the opportunity to help secure your employees’ financial futures, but you can provide some important tax breaks for your company. Here are some of the retirement plan options available.
A shrinking unemployment rate, 3.8% in February 2019 (below market expectations of 3.9%), down from 4% in January, is causing employers to compete harder to attract the best and brightest employees.
Simplified employee pension (SEP) IRA
The SEP plan is funded solely by you, the employer, but each employee opens an IRA and chooses his or her own investments. There are minimal startup and operating expenses, and contributions are 100% vested right away. You retain discretionary control over the amount of annual contributions (up to 25% of an individual’s compensation), but you must make contributions for all employees over 21 years old who have worked for the business and earned at least $550 in any three of the preceding five years. The contributions are tax deductible for the company, and all earnings grow tax deferred until the participants withdraw them. Note that, as the business owner, you can’t allot a higher percentage for yourself than you do for your employees.
The SIMPLE (Savings Incentive Match Plan for Employees) is affordable and easy to set up for businesses with fewer than 100 employees, with minimal ongoing maintenance expenses. Each employee can defer up to $13,000; $16,000 if age 50 or older (2019). The business is required to make matching dollar-for-dollar contributions on the first 3% of employee elective deferrals, or a uniform 2% contribution to all employees, regardless of whether they elect to contribute. And like the SEP, all contributions are tax deductible. However, be aware that with the SIMPLE IRA, participants who roll money into a new account within the first two years could be subject to a penalty as high as 25% of the account’s balance.
401(k) profiit-sharing plan
A 401(k) profit-sharing plan comprises both employee salary deferrals and matching employer contributions. Typically, plan participants select their own individual asset allocation from a variety of investments, including a Roth option, which allows for either pretax or after-tax salary deferrals. The business also can make profit-sharing contributions among all eligible participants, but doesn’t have to contribute in years when profits are low – it’s completely up to your discretion. Also note that you can use an age-weighted method, in which older employees or those who have worked for you the longest receive a proportionately larger share of the contribution.
Employee stock ownership plan (ESOP)
An ESOP is set up via a trust fund through your company to make annual contributions to individual employee accounts, which are used to buy company stock. Or, your company can issue new shares to an ESOP, deducting their value (for up to 25% of covered pay) from taxable income. Employers can match employee contributions with company stock, which may be worth more than a matching cash contribution. The stock is typically subject to a vesting schedule, and employees pay no tax on the contributions until they receive the stock when they leave or retire.
With today’s strong (and growing) job market and workers’ desires to fund fulfilling retirements, you may want to carefully consider offering employees this benefit sooner rather than later. Your financial advisor can help you evaluate your choices.
Say yes to the vest
Per IRS rules, a 401(k) profit-sharing plan must have a vesting schedule that states an employee’s percent ownership of the employer’s contribution to the fund (employee contributions are 100% employee owned). This schedule can cause an employee to lose significant dollars if he or she leaves an employer before fully vested – which may result in a decision to stay longer. The IRS offers two vesting schedules:
- The cliff: No vesting is required before a three-year service maximum. After that time 100% vesting is required.
- Graduated vesting: The plan must provide vesting at least as fast as 20% at two years, then increasing each year to 100% by year six.
And employees will participate – research by The Pew Charitable Trusts shows when an employer offers a retirement plan, 52% of millennials, 75% of Gen Xers and 80% of baby boomers will enroll. What’s more, employee participation – for workers of all ages – rises nearly 16% when an employer match is offered. Talk to your plan administrator or advisor for details.
- To gain real-world feedback, take opportunities, such as networking events, to talk with other business owners about their plans.
- Make an appointment with your advisor to identify a plan that fits both your business and your personal retirement planning needs.
- Watch your timing – All qualified plans must be established by the end of the plan year, e.g., December 31 for plans based on the calendar year.
Changes in tax laws or regulations may occur at any time and could substantially impact your situation. You should discuss any tax or legal matters with the appropriate professional.
Six hacks to ultimate productivity
Hacks help us perform everyday tasks smarter and with greater efficiency. And when it comes to productivity, smart and efficient rule the day. So we’ve chosen six hacks to help you and your employees become your most productive selves.
1. Tell your smartphone to dummy up: There’s nothing like a buzzing, beeping or musical notification to pull you out of your zone. Noncritical notifications have their place but not in your focus space. Turn them off.
2. Stop multitasking: Science shows that our brains don’t multitask. We simply switch from one task to another – usually without completing any to a greater or lesser extent. Choose a task, focus on it and be done.
3. Take calendar control: To see how much you can actually accomplish in one day, take to-dos, email reading and responding and myriad tasks and schedule them on your calendar. It will help you set realistic workday goals.
4. Give me a break!: Our minds aren’t geared for hours of nonstop concentration. Some people use the Pomodoro Technique – 25 minutes of concentrated work then a five-minute break. Don’t underestimate the power of a break.
5. Manage meetings: Try scheduling an hour meeting for only 45 minutes. Better yet, keep most meetings at 30 minutes. People will be more focused and, hopefully, the one-hour-plus meeting will become a thing of the past.
6. Use productivity tools: Use handy helpers to gain control of things that bounce uncontrollably around your day.
- For time management, try Toggle or Yast.
- Stumble across something to read later? Try Feedy, Pocket or Evernote – they work across all your devices. Buffer makes it easy to share articles.
- Control all of your social media accounts with HubSpot or Hootsuite.
- Keep passwords in one place with LastPass or Dashlane.
- Share this list with employees to help them stay focused.
- Commit to yourself, or with others, to put these hacks into practice.
- Talk with others to see how they work – or how they can be improved.
Changing forces forcing change
Here’s how to integrate the benefits of enterprise mobility in an increasingly mobile world
When Apple introduced the iPhone in 2007, followed by Google’s Android OS, enterprise mobility (EM) was born – though businesses didn’t quite know it yet. Soon, people with the help of developers building enterprise apps began finding ways to use their personal devices for work (sometimes without employer permission). The era of bring your own device had arrived – along with new opportunities and benefits.
Maximizing the benefits of mobility
By letting employees use the mobile devices they already own, then ensuring the data that resides on the devices is secure and strategically managed, small and midsize businesses (SMBs) enjoy cost savings in terms of time spent deploying tech and device training. And by using a service provider (more on this later) that specializes in cross-platform mobile device management, the problem of multiple platform use – Android, iOS and Blackberry – is easily overcome.
Enterprise mobility can also improve communication between management and staff and enable workers to collaborate on specified projects when they work remotely or are in the field. Employees and managers can share real-time insights and reduce chances of miscommunications.
Critical information can also be accessed or uploaded from anywhere and at any time because EM gathers data in one secure place. This also helps save time spent on data entry and analysis. By consolidating business information electronically the use of paper forms can be reduced, which can increase the accuracy of the data collected. EM also enables employees to upload forms, documents and orders with just one click, wherever they are. This also helps reduce entry errors and miscommunications that can cost time and money.
Making EM affordable for SMBs
With larger budgets and robust IT resources, larger companies were the first to fully embrace enterprise mobility. Today, however, scalability can make EM a viable solution for small businesses, too. For instance, rather than breaking a budget to pay for in-house IT support, cloud management and mobile device management, an SMB can use a dedicated managed mobility services provider that can create a program and provide services specifically tailored to a business and provide services as needed. And by consolidating operating costs onto a single, point-of-service bill, money can be saved.
- Talk with your advisor about creating a budget for your EM investment. You can then share the budget with a chosen service provider and plan a staged implementation of services as you can afford them.
- To choose a provider, start with your own mobile service. Many have enterprise divisions with products and services geared for businesses like yours.
- Get referrals from other business owners you know. Firsthand knowledge and recommendations can be invaluable in the discovery process.
Material prepared by Raymond James for use by its advisors. Raymond James is not affiliated with any companies mentioned in this material.
There is no assurance that any investment strategy will be successful. Investing involves risk and investors may incur a profit or a loss.
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.