Business Owner Benefits and Planning

From retirement plans and employee benefits to tax savings and impact investing, Sound Planning Partners can bolster your business with strategic planning that works for the good of both your company and your employees.

401(k) Safe Harbor

Adding a safe harbor provision to your 401(k) generally allows your highly compensated employees (HCE) to max out their retirement contributions and alleviates annual compliance testing. Highly compensated employees are the folks that work at your company and own at least five percent of the company, are spouse, child, grandparent or parent of someone who owns at least five percent of the company, or who earn more than $120,000 yearly.1 Safe harbor provisions help in these ways:

  • Exempts your 401(k) plan from most annual compliance testing
  • Increases your and your highly compensated employees’ personal retirement savings capability by allowing maximum contributions to your 401(k)
  • Employer contributions reduce an employer’s taxable income, as with any employer contribution

Should your plan fail compliance testing without the addition of a safe harbor provision your top earning employees may be substantially limited in what they can contribute toward their 401(k) plans. In this scenario HCE contributions are typically limited to two percent more than the average contribution of all employees who don’t fall under the HCE designation.

 

1As of 2018, adjusted for inflation.

Profit Sharing

A 401(k) plan with profit sharing can be a useful tool in helping your employees plan for retirement while providing benefits to both employees and employers. Compelling reasons to pair a profit sharing plan with your company’s 401(k):

  • Profit sharing plans are highly adaptable in terms of employer contributions
  • Business owners can total up to $55,000 per year1 in personal retirement savings by adding a profit sharing plan to a traditional 401(k)
  • It’s painless to add profit sharing to any 401(k) plan
  • Contributions to a 401(k) plan with profit sharing are a deductible business expense; earnings on the contributions grow tax-deferred for your employees
  • Employees typically view a profit sharing contribution to their 401(k) as employer dollars bolstering their retirement goals

A 401(k) with profit sharing can help small business employers anticipate and govern how much they contribute and to which employees. Traditional 401(k) plans with employer match often require an employer to make consistent, standard rate contributions to employees’ retirement accounts. Adding profit sharing allows you to make yearly determinations of how much you’d like to contribute based on the profitability of your business, empowering you to manage your financial responsibility when it comes to employer contributions

 

1 As of 2018, adjusted for inflation.

Cash Balance

A cash balance plan enhances a 401(k) profit sharing plan with the goal of boosting retirement savings and tax deductions for business owners. These plans are different from 401(k) plans in that all assets within the cash balance plan come from the employer, assets are merged, and investments are employer-directed and employer-guaranteed. The contribution limits of a 401(k) alone may not be enough to achieve retirement savings goals for many prosperous business owners, so adding a cash balance plan may help. Guaranteed company contribution to their employee retirement accounts means that employees benefit too. A cash balance plan is an IRS-qualified defined benefit retirement plan that can help business owners attain tax deductions and savings rate up to four times greater than a 401(k) plan alone.1 A cash balance plan may be a good fit for you if:

  • You would like to reduce your annual taxable income by $55,000+
  • You want to measurably increase the rate of your retirement savings
  • Your business generates reliable revenue
  • Your annual income is $275,000+
  • Your business has less than 15 employees per owner

  1 Assumes $18,500 in annual 401(k) maximum contribution; $6,000 catch up; $36,500 profit sharing

Impact Investing

Our expertise in sustainable and impact investing offers a unique opportunity to align your company’s 401(k) portfolio with values of your workforce. Millennial employees want to see a net positive impact on the world. Strengthening your 401(k) with intentional investing can:

  • Increase participation among younger employees
  • Build employee loyalty
  • Attract new talent from a demographic with sustainable values

Common Reasons Businesses Make a Switch

Save more on taxes

Failed compliance testing

Low employee participation

Service failures and fees

Connect with Us

Contact Us

 

865-313-8056

Email Erik

100 Taylor Street, Studio B6
Nashville, Tennessee 37208

 

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Investment Advisory Services offered through Cambridge Investment Research, Inc., a Registered Investment Adviser. Cambridge and Sound Planning Partners LLC are not affiliated.

This communication is strictly intended for individuals in AL, IL, KS, NY, OH, OR, TN, VA, and WV. No offers may be made or accepted from any resident outside the specific states referenced.