Benefit Plans and Your Small Business
Young talent often comes with a laundry list of demands. Move over millennials, Gen Z has entered the workforce, and if you are a business owner, it's important to know what this generation values when it comes to their career.
To retain and motivate the best talent within your business, you're going to need to offer a competitive benefits package. While high wages are often the driving force behind recruiting the best and brightest to your organization, your benefits package may be a potential employee's deciding factor. These kids know how much they can make by posting on TikTok, so if you want them to apply their skills to your business, it's going to have to come with some benefits.
Required Benefits
Depending on the state, as a small business, there are several benefits you are required to offer to your employees, including:
Workers' Compensation (Excluding TX)
Unemployment Insurance
Disability Insurance (Mandatory in CA, HI, NJ, NY, RI, and Puerto Rico)
COBRA (If you have over 20 workers and offer group health insurance)
Social Security and Medicare
Family and Medical Leave (If you employ 50 or more employees)
Health Insurance (If you have 50 or more employees)
Be sure to consider the state where you operate your small business to ensure that you have adequate benefits, and never hesitate to contact a lawyer to ensure you remain compliant with all state and federal regulations.
Voluntary Benefits
If you are feeling generous, there are additional benefits you may want to offer your employees that will set you apart from your competitors when attempting to hire and retain employees. These may include:
Paid Time Off
Retirement Plans
Flexible Spending Accounts
Health Savings Accounts
Employee Assistance Programs
Life Insurance
Flexible Hours or Remote Work Options
Wellness Programs
Defined Benefit Plans
While you may not think the 22-year-old applying for an open position is thinking about retirement, they are. Every. Single. Day. And one of the most talked about voluntary benefits is your business's retirement plan. When operating a small business, you may want to consider providing a defined benefit plan to provide a fixed, pre-established benefit for your employees at the time of their retirement. As an employer, you can contribute (and deduct) more each year than in defined contribution plans; but defined benefit plans can be a little complex and sometimes more costly to maintain than other types of plans.
While you can suggest other retirement plans if you offer a defined benefit plan, you must still file a Form 5500 with a Schedule SB annually and have an enrolled actuary determine the funding levels.
This option comes with many benefits for both the employee and employer, including the amount of money that can be accrued in a short period and the larger-than-most-deduction it comes with. While it is likely the most costly and complex plan, it provides your employees with a predictable benefit that can be used to promote certain business strategies by offering subsidized early retirement benefits.
You may be able to accrue twenty years of savings into ten, but this option does come with some risk. Your business must meet a minimum payment each year regardless of how well it does. This means that potential inflation, or an economic downturn, can pose risks for your business.
The bottom line: this option allows you to give money you would be paying in taxes to the government to your employees instead.
AccountAbility is here to help! If you would like to discuss employee benefits or whether or not a defined benefit plan is right for your small business, contact us today!