The Law Office of Riedmiller, Andersen and Scott LLC.

What Factors To Consider When Selecting The Retirement Plan


Retirement plan provides significant tax benefits to the employers and offers them and their employees’ incentive of future savings. Various types of retirement plans are available to small companies or businesses, each with its own restrictions and requirements. It’s not necessary that the same plan is ideal for businesses of ownership structure and sizes, so before making the decision business owners should first do their homework.

Smart CPA help the business owners choose and implement the most suitable plan for them. Recommendations are based on the unique aspects of the client’s business like retirement goals of the business owner, the number of employees, how the business is set up (as a limited liable company, sole proprietorship, an S corporation or a C corporation), and so on. Firms’ specialist assists them to understand the compliance and legal issues regarding each plan type, as well as any kind of tax advantage it may bring.

To be an employee of the organization that offers its people with the retirement plan is the greatest financial advantage that the employee can enjoy. Such plans come in various shapes but all have one similar thing that is they help the employee to achieve the retirement savings goals. It is necessary for the CPA firm to evaluate and consider all the known factors that would influence the operations, reporting requirements, and funding of the retirement plan. Some major factors include:

  • Contribution: The employer, employee, or both can contribute.
  • Affordability: The retirement plan must be affordable for the business to fund and administer.
  • The number of employees to participate and their eligibility.
  • Employee vesting period and turnover: A vital criterion for selecting the retirement plan is the employee turnover in a business. Should the company experience a good deal of the employee turnover, the company should give a special consideration to a vesting period of the plan.
  • Administrative requirements: another factor to consider is how difficult it will be to administer the plan. For small business owners who have short administrative staff normally look for the benefits and plans that place less compliance burden on the payroll specialist or human resource.
  • Contribution limits: The maximum and minimum contribution restriction for employees and employers need to be taken into consideration.
  • Need for a third-party administrator: another important aspect to be considered when selecting the plan is whether it requires the third-party administrator this means that the business owner will experience the additional cost. A defined benefit plan needs valued compliance services by the TPA (third-party administrator). Such sophisticated plan should meet the certain IRS regulations to keep the tax status favored. The designed plan may be subject to the excise penalties and taxes.
  • Withdrawal timings and limits: when and how can assets be accessed? Are there any penalties for the early withdrawal? Are there any exceptions to all these rules?
  • Operational aspects: how contributions can be made, managed assets, and information be provided to the participating employees?

Final Considerations

Equipped with the knowledge on numerous personal tax and financial topics, CPA firms can be a valued advisor to the small business owners in planning their retirement goals. They play a vital role in helping these clients in selecting the retirement plan that suits their personal goals as well as the requirements of their business.

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The Law Office of Riedmiller, Andersen and Scott LLC provides strong representation for personal injury and workers compensation cases.

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