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9 Replies Last post: Aug 28, 2008 9:08 AM by rlucisano

401K or Simple IRA for Small Business

Feb 19, 2008 2:25 PM

roma1625 9 posts since
Feb 19, 2008

I would like to set up either a 401K or Simple IRA for my employees. I have less than 10 employees at this time (hoping to expand) and cannot afford to make any employer contribution. What is my best option?

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LUCKIEST 7,939 posts since
Aug 6, 2007

1. Re: 401K or Simple IRA for Small Business Feb 19, 2008 2:44 PM

1625, Welcome to this web site
Do you have an accountant?? Lawyer?? Good question to ask them.
If you google the question 401K or Simple "IRA for Small Business,
there is a lot of info. Go to Members page and add
a few words about your business
LUCKIEST

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dublincpa 165 posts since
Jan 29, 2008

2. Re: 401K or Simple IRA for Small Business Feb 19, 2008 3:46 PM

I have another client in the same position. If you do a SIMPLE, you have to either do a match or contribute for everyone regardless of participation. If you do a 401k and the owners or highly compensated employees participate, you will most likely have to set up a safe harbor or put in what is called a top heavy minimum contribution. The 401k will all but definitely have higher administration costs.

I guess to sum it up - If you want to offer a benefit, you have to offer benefit. Just setting up a plan as a conduit for the employee contributions doesn't get anyone anywhere.

If you don't want to bite the bullet on the SIMPLE, you might want to recommend that the EEs set up IRAs and fund them through a payroll direct deposit or something similar.

Good luck. It ain't easy bein' at the top.

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roma1625 9 posts since
Feb 19, 2008

3. Re: 401K or Simple IRA for Small Business Feb 19, 2008 3:48 PM

in response to: LUCKIEST

Luckiest, if the answer to every question is to consult your accountant or attorney, there would be no need for this board, would there?

I know how to use Google. Thanks.

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CashforBiz 7 posts since
Feb 26, 2008

4. Re: 401K or Simple IRA for Small Business Feb 27, 2008 7:35 AM

To help you I provide alternative financing for all small and medium businesses. Contact me at 347 223 1434 or email me at vernel87@yahoo.com so we can discuss these issues in detail.

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calbear81 3 posts since
Jun 24, 2008

5. Re: 401K or Simple IRA for Small Business Jun 24, 2008 7:41 AM

There is employer associated expenses seting up retirement plans. Administrative costs of a 401k can be anywhere between $2,500 to $3,000 per year, plus your contributions. A SIMPLE will require a 2% accross the board or 3% matching contribution by employer on employee's income. About $25 per year administrative fee will also apply on a SIMPLE. In agreement with other post, if you do not plan to contribute, a individual Traditional or Roth IRA may probably the best choice for your employees. More info @ securefloridian.com

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wealthoffice 12 posts since
Aug 11, 2008

6. Re: 401K or Simple IRA for Small Business Aug 11, 2008 9:27 PM

Here is what you need to do 1st.

Conduct a survey among your employees and determine that if you started a plan would they put away their own money and if so, how much (% or $ per pay period).

Then your employees will ask, will you match?, from your post it appears you wont but there are ways to help employees see past that--such as tax credits and such.

A simple plan is really not that simple, contributions are sometimes a pain and you must have it for atleast two years plus you have to match, where as the 401k has a start up cost and annual costs, but there are tax credits to help for the 1st few years of the plan; plus the money is qualified meaning almost bullet proof from creditors. Either one can be done pretty easily.

Just find out what your employees want.

You may just ask them if they want a bonus instead?

If you want to explore further, email me at aaron@fusion401k.com or post for more. Good luck.

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Awais1 1 posts since
Aug 12, 2008

7. Re: 401K or Simple IRA for Small Business Aug 12, 2008 1:22 AM

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grega1 1 posts since
Aug 23, 2008

8. Re: 401K or Simple IRA for Small Business Aug 23, 2008 2:33 AM

Hi Roma,

The Simple IRA requires a match, so forget about it. I setup inexpensive 401k plans all of the time for businesses like yours, and no you don't have to give a match. You can offer one in the future if the company is more profitable. Call me at 800-241-7258 ext. 1074 to discuss further or e-mail me direct at greg.albright@ubs.com

Greg

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rlucisano 5 posts since
Aug 15, 2008

9. Re: 401K or Simple IRA for Small Business Aug 28, 2008 9:08 AM

If you can't do a contribution a 401 k would work, you can find a real low cost plan for fees out there. The simple requires a contribution of some kind up to 3%. You can opt out of contribution on a simple but the 5 yr rule requires a contribution for 3 out of the 5 yrs. A 401 k doesn't require any contribution. Check with Principal they have a small company 401 k package plan. What state are you in?

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ForumsEmployee Benefits and Retirement Planning

This Question is Possibly Answered

401K or Simple IRA for Small Business

Feb 19, 2008 2:25 PM

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