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  • Good businesses need good employees, and good employees look for good opportunities. A competitive benefits package plays a major part in attracting quality talent to your company, as well as retaining current workers. 

    Employee benefit administration can be a time-consuming and costly endeavor for a small- to mid-size company, especially one that wants to offer a complex benefits package. Instead of just accepting the hassle as a necessity, you should consider the possibility of teaming up with a Professional Employer Organization (PEO) like Group Management Services (GMS) to benefit your benefits.

    Employee benefits administration is yet another service provided by a PEO.

    Many Parts, One Partner

    A good benefits package in a pretty complex affair. Some elements of a package may include:

    • Health insurance

    • 401k retirement plans

    • Profit sharing

    • Supplemental insurance plans

    • Benefit administration

    • Group life

    • COBRA

    • Disability

    • Dental

    • Vision

    That’s a lot of information to have to focus on and administer out to your employees. Fortunately, a PEO has trained professionals that can manage your business’ benefits package.

    This also leaves you with one point of contact for your benefits package needs, instead of needing to deal with multiple providers when you have questions.

    Saving Time and Money

    Another advantage of partnering with a PEO is that it allows you more time to focus on your business. While you handle your area of expertise, GMS’ experts can streamline your employee benefits administration. In fact, we help out so many employers and their employees that we have greater buying power through economy of scale.

    The Right Fit

    A good benefits package can help you attract and retain talented employees. If you’re looking to save some time and money on employee benefits administration, contact us today to see if a PEO is the right fit for you and your company.

  • Why did you start your business? Maybe because you are good at doing something. Maybe because you can offer a service that not many others can.

    You worked hard to grow your business, to show everyone why they should use your company for their needs. You are a professional, and nobody knows your business better than you do. So why would you ever consider outsourcing back office tasks to a PEO if you can do them yourself?

    At the end of the day, we all want the same thing: to be successful. Sometimes, to succeed we need to embrace the fact that we can’t always do everything ourselves.

    Image of a human resources outsourcing company.

    Why it Can Pay to Outsource to a PEO

    PEO stands for Professional Employer Organization. Just like you are a professional in your industry, GMS is a professional in ours. If you care about your business and your employees, you want to make sure that your company is a well-oiled machine! That’s why our team of well-versed, educated, and honest specialists help small to mid-sized businesses thrive every day.

    We believe that just because you don’t have thousands of employees doesn’t mean you shouldn’t have access to the same buying power or experts!

    As a business owner, doing everything yourself can be overwhelming, especially when you find that some areas are getting neglected or are distracting you from the business.

    By outsourcing basics like payroll management, workers’ compensation claims, benefits administration, and any human resource function to GMS, you can acquire better, less expensive services than if you were to go hire an individual to do that for you.

    A PEO can help you go back to focusing on your business knowing that these things aren’t just being done, but that they’re being done right. Contact us today to talk to a GMS representative about how we can help you and your business.

  • From payroll to benefits to recruitment, human resources is an important function that keeps a business running. And like any other business function, the management and implementation of these HR responsibilities all incur costs that you’ll need to factor into your budget as you plan for the new year.

    Whether you’re basing your budget on last year’s expenditures or planning every budget item from scratch, it’s important to review your different HR needs, so you don’t come up short in the places where you need extra funds. The better you can understand these HR costs, the better you can plan what the next year will look like for your company. Done well, an HR budget will help to prevent over-hiring and understaffing and ensure you have the resources to keep your team engaged on the job. Here are some key HR components that you should consider when planning a yearly budget.

    Image of money set aside for HR budgeting items for next year.

    Recruitment

    There is one big question when it comes to employee recruitment: How many people do you expect to add next year? The answer to that question will dictate how much you’ll need to put into recruitment efforts for your business.

    Employee recruitment can be expensive. The Society for Human Resource Management (SHRM) writes that companies spend an average of $4,129 per hire in recruitment costs. These costs include attempts to find candidates and actions to help qualify those targeted recruits, such as:

    • Advertising
    • Travel and events (e.g., College job fairs)
    • Drug testing
    • Background checks
    • Agency fees
    • Relocation

    Not to mention, you’ll have to account for the time it takes to screen and interview candidates, which could take anywhere from a couple of weeks to a few months. Every hour spent during the hiring process is an hour taken away from other essential business tasks. 

    Whether you’re looking to expand your staff or work in a high turnover industry, you should create a budget for your planned recruiting efforts. If you’ve been keeping track of how much you’ve spent on recruiting in past years, extrapolate that number based on how many candidates you want to hire in the coming year so that you don’t come up short when you need to fill an important position.

    Training and Development

    Once you hire new employees, you’ll need to train them. Not only can training better prepare your new employees for their positions, “95 percent of hiring managers considered employee training as a key retention tool,” according to a study conducted by the Chartered Institute of Personnel and Development.

    Of course, training and development costs money. According to the Association for Talent Development, the average cost of training is $1,888 per employee for businesses with fewer than 500 workers. These costs can include:

    • Internal training programs
    • Event registration fees
    • Travel expenses
    • Educational materials
    • Consulting fees

    Employee Wages and Salaries

    Payroll is one of the biggest items that you’ll have in your HR budget. The Houston Chronicle estimates that the average business spends somewhere between 15 to 30 percent of its gross revenue on payroll, although companies in the service industry may be closer to the 50 percent range. Regardless of your industry, make sure to take employee salaries into account, plus any estimated costs for any new employees you expect to add on in the coming year.

    While salaries are a huge part of your compensation budget, there are other considerations as well, such as payroll management costs, potential overtime hours, and any incentive programs. This also includes any raises, whether you give employees raises that coincide with performance evaluations or annual cost of living raises to account for inflation.

    Employee Benefits

    In addition to employee pay, there’s also a wide variety of benefits, such as health insurance, 401(k) contributions, and any other ancillary benefits, that you may offer as part of your overall employee compensation package. These costs will require a portion of your HR budget, too. 

    If you offer health insurance, as many small businesses do, it will likely take up a sizable portion of that budget. According to SHRM, the “average cost of providing healthcare makes up 7.6 percent of a company’s annual operating budget.” As an employer, you can control some of these costs by electing how much of the health insurance premium you’ll contribute and how much will be your employees’ responsibility. As you go through the budgeting process, you’ll want to account for any possible increases for next year’s health insurance premium, as well as review your contribution strategy. Keep in mind, these healthcare costs don’t necessarily include other insurance benefits you may offer, such as dental, vision, and life insurance. 

    Additionally, if you contribute to your employees’ 401(k) retirement plans, you’ll need to factor these amounts in to your budget as well. Fortunately, this should be an easy line item to budget for next year. Since it’s a fixed percentage, you can estimate that all employees will receive a specific amount.

    Employee and Labor Relations

    While compensation, benefits, and training can go a long way toward improving employee morale, there are some other measures you can take to reward workers. These include:

    • Service awards
    • Recognition efforts
    • Performance and attendance incentives
    • Company events
    • Employee birthday perks and gifts

    These items may not make up a massive part of your budget compared to other key HR needs, but they can be important additions to your company culture. Also, you never want to find out that you have to cancel those service awards because you forgot to plan ahead for them in past budgeting meetings. 

    On the flip side, you may also want to consider setting aside a small portion of the budget in case you face any labor relations issues. Budgeting for outplacement or legal fees can help your business prepare in case you have any unexpected issues in the upcoming year. 

    Health, Safety, and Security

    HR budgeting also gives you a chance to invest in the well-being of your employees by making your work environment a safer, healthier place. By putting aside some of the budget for certain programs or initiatives, your business can reap the rewards of focusing on health, safety, and security.

    In terms of workplace safety, GMS’ own Jeff Costin notes that workplace safety programs can increase workplace productivity, improve retention rates, and reduce costs affiliated with injuries at work. Budgeting for safety training programs, new safety manuals, regular inspections, and other strategies can help you manage workers’ compensation claims costs and make your workplace safer in the coming year.

    Budgeting for health-related programs can also be a worthwhile expense to plan for the next year, as 75 percent of all healthcare costs are attributed to preventable conditions. A workplace wellness program can help your employees develop a healthier lifestyle through a variety of initiatives, such as:

    • Smoking cessation programs
    • The addition of a fitness facility or space
    • Health screenings
    • Lunch and learn events

    An HR Budgeting Partner

    Once you have your HR budget in place, you’ll need to have the support to move forward with all your plans and manage your HR administration needs. A Professional Employer Organization (PEO) like Group Management Services (GMS) can help businesses manage these HR functions, including payroll and benefits administration. 

    If you have any questions about how to get the most out of your HR budget or are worried about any compliance concerns associated with managing HR, contact GMS today to talk with one of our experts about how we can help your business prepare for the future.

  • Managing the operations of a small business is costly and requires time away from more valuable projects. That’s why many small and mid-size businesses outsource human resources, payroll, employee benefits, and risk management services. A PEO (Professional Employer Organization) can help take these responsibilities off the plate of business owners, so they can focus on the growth and success of their business.

    We’ve put together a guide to understand what PEO services entail and how to choose the right PEO for your business.

    PEO services help small and mid-size businesses with employee management.

    What is a PEO?

    A PEO provides comprehensive business solutions and services. Through the co-employment model, PEOs work with small and mid-size businesses to:

    • Manage payroll and tax administration
    • Manage human resources and risk management functions
    • Provide employee benefits
    • Stay compliant

    By providing these services, PEOs help make the companies they serve a better place to work and conduct business. This typically translates into faster growth, higher retention rates, and increased success for businesses. The National Association of Professional Employer Organizations (NAPEO) found that businesses working with a PEO:

    • Grow 7 to 9 percent faster
    • Have 10 to 14 percent lower employee turnover
    • Are 50 percent less likely to go out of business

    PEOs help businesses grow by allowing them to spend more time improving productivity and profitability while focusing on their core mission. Additionally, employees benefit by gaining access to big-business employee benefits such as 401(k) plans, wellness programs, and health, dental, life and other insurance offerings. All of this contributes to the success of a company.

    How to Choose a PEO

    There are more than 900 PEOs in the U.S., according to NAPEO. With so many options, it can be hard to know which one to choose. Follow these tips to help you to choose the right PEO for your business.

    Assess Your Business Needs

    Before talking to a PEO, you should take stock of your business needs. What current challenges does your business face? Do you anticipate any changes to your company that could impact the services you need? Look at facets of your business, such as:

    • Payroll: Between managing payroll and filing taxes, small and mid-sized companies spend an average of $2,000 per employee each year to handle payroll and many incur IRS penalties each year due to compliance issues. Outsourcing payroll services to a PEO can save you time and money by providing you with a simplified, online payroll system.
    • Human Resources: From recruiting and retaining employees to tracking vacation time, managing your company’s HR responsibilities takes a lot of time. Outsourcing these HR functions to a PEO can help you save time and money, while growing your business.
    • Risk Management: Managing your company’s risk on your own can be time-consuming and costly. Instead, you can build toward a more secure future by outsourcing to experts at a PEO. PEOs can help you qualify for workers’ compensation discounts, keep unemployment tax rates down, and create a safer environment for your employees.

    Identifying your needs within each of these categories will help you better determine how your business will use a PEO and set the stage for choosing a qualified partner.

    Build Your Benefits Package

    Employee benefits will make your business a great place to work and help retain talent. While you’ll be hard pressed to find a PEO that doesn’t offer access to health insurance, the providers they work with and the amount of coverage their plans provide will vary. In addition to assessing your business needs, you’ll need a good sense of what types of health coverage your current and future employees will require and what you’re willing to spend on it.

    When you work with a PEO, instead of directly with insurance companies, you’ll be able to leverage buying power through mass policies, which lets you take advantage of purchasing multiple policies at typically lower premiums.

    Speaking of multiple policies, you’ll also want to consider other benefits like dental, vision, and life insurance as well as 401(k) retirement savings programs to make your business more attractive to quality candidates. Additionally, wellness programs can help manage your premiums, while keeping your business running like a well-oiled machine. Whichever benefits are most appealing for your business, you’ll want to do your research to make sure you find a PEO that has everything you require.

    Perform a PEO background check

    When vetting PEOs, it’s important to look at their history, experience, and qualifications. Ask questions, such as:

    • How many companies do they partner with?
    • Do they have experience working in your industry?
    • How many employees do they represent?
    • What is their client retention rate?

    And don’t forget to look at reviews from places like Google and Facebook. These are all telling signs of whether a PEO will be able to properly handle your business needs.

    Additionally, accreditations from organizations like the Better Business Bureau (BBB) and certifications, such as the Certification Program for Professional Employer Organizations (CPEOs) from the IRS, help demonstrate trustworthiness and reliability in a PEO. CPEO certification affects the employment tax liabilities of both the CPEO and its customers. To become and remain certified under the CPEO program, CPEOs must meet tax status, background, experience, business location, financial reporting, bonding, and other requirements. With only 37 CPEOs in the country, small businesses know they are working with a trusted partner.

    Evaluate a PEO’s Technology

    The purpose of PEO is to make your life easier. If the technology platform that a PEO offers isn’t simple to use, then the PEO is going to be more of a burden than an asset to your company. Web-based payroll portals benefit employers by compiling everything they need to manage their back office in one place. They also help employees get paid on time, track time, and access W-2’s and paystubs.

    Your PEO’s online payroll system should help employers:

    • Manage and access payroll information
    • Complete payroll in minutes, not hours
    • Easily keep track of deductions
    • Simplify workers’ compensation calculations and payments
    • Generate on-demand payroll reports

    These payroll functions streamline the process for employers and keep employees satisfied.

    Beyond payroll, any other administrative functions a PEO can digitize is only to your advantage. Your PEO should offer online data collection services for:

    • Employee reviews
    • Timekeeping and PTO requests
    • Health insurance and employee benefits
    • Company communication
    • Employee handbooks

    Being able to store these types of files in an online portal makes it easier for you to access, edit, and track.

    Focus on Your Business

    The point of working with a PEO is to ease your workload. A PEO that you have to manage is only going to add to your stress and laundry list of tasks and responsibilities. Knowing your PEO is taking care of your more administrative needs while you focus on the core of your business is comforting to business owners.

    Your PEO should provide you with designated HR, payroll, and benefits specialists to meet all of your needs. Additionally, your PEO should have a comprehensive risk management team, from  safety specialists that keep your workplace and employees safe, to unemployment and workers’ compensation experts to investigate and help process claims.

    By having a PEO handle the HR, payroll, benefits, and risk management side of your business, you’ll be able to focus on what really matters: building your business.

    Work With a PEO

    When you work with a PEO, you need to make sure all your needs will be met. Group Management Services offers payroll, human resources, employee benefits, and risk management services to help your business succeed. With our proven history, easy-to-use online payroll portal, and dedicated team of experts, GMS is proud to take on your administrative burdens. When you work with us, you can put your focus back on client relationships, building an effective team, and growing your profits, while we help you reduce costs, limit risk, and save time and money.

    Ready to work with a best-in class PEO? Contact GMS today to talk with one of our experts to see how we can make your business simpler, safer, and stronger.

  • Changes in healthcare are prompting many small business owners to rethink the role of employee benefits like health insurance at their companies. According to PricewaterhouseCoopers, health insurance premiums are expected to rise by 6 percent in 2020, which can weigh heavily on your bottom line. Below, we explored some of the top health insurance trends that will impact small businesses and how you can adapt in the ever-changing benefits landscape.

     Small business health insurance is changing in 2019.

    Small Business Health Insurance Trends

    In order to stay competitive in an ever-tightening market, small business owners must develop savvy benefits strategies to attract and retain top talent. From trending workplace initiatives to increases to federal regulation changes, here’s how small business healthcare is changing in 2020.

    Increase Deductibles

    To combat rising premium costs, many small businesses are switching their insurance offerings to high deductible health plans (HDHPs). HDHPs can be paired with health savings accounts (HSAs), which allows employers to make tax-free contributions to their employees’ accounts and receive tax benefits. Additionally, the funds rollover every year, making them a great supplement for retirement savings accounts and an attractive employee benefit.  

    According to the Society of Human Resource Management (SHRM), 56 percent of employers offer HSAs as a benefit—a percentage that is expected to see rapid growth in the coming years. According to Devenir, HSAs have risen 12 percent year-over-year, with assets growing by 20 percent annually. The investment advisory and consulting firm projects that by the end of 2021, the HSA market will approach $88 billion in assets held by more than 30 million accounts.

    Prioritize Preventive Care

    With rising health care premiums, unhealthy habits can further drive up small business healthcare expenses. As a result, preventive care will become a larger priority for small business owners in the coming years.

    Already, the Centers for Disease Control and Prevention reports that almost half of U.S. businesses offer some type of wellness program. Moving beyond counting steps or logging water intake, initiatives like gym memberships, screening tests, and smoking cessation programs will be commonplace among small businesses in 2020. 

    Benefits PDF

    Offer Virtual Care

    Seeing a doctor in person can be inconvenient and costly when you factor in scheduling issues and co-pay fees. Many small businesses have found telemedicine, also referred to as telehealth or virtual care, to be a good solution. According to the National Business Group on Health, 56 percent of the companies surveyed currently offer telemedicine services to employees. NBGH projects nearly all companies offering group health care plans will also provide telemedicine by 2020.

    Telemedicine allows a patient to have a consultation with a medical provider via a computer, smart phone, or tablet. It’s an attractive benefit that allows patients to see a doctor around the clock, saving you and your employees time and money. In fact, insurance broker firm Willis Towers Watson found that employers could save up to $6 billion per year by providing telemedicine.

    Utilize Benefits Technology

    Small firms are increasingly looking to better utilize technology for help managing employee benefits. A Guardian Life Insurance study found that nearly half of all small businesses are more digital than paper-based—a percentage that will continue to grow as more business owners realize the low cost and high potential. 

    Migrating benefits administration to a web-based portal offers a simpler and more efficient way for employers to manage their back office in one place. In addition to managing benefits, small businesses can look to digitize payroll, employee reviews, timekeeping, PTO requests, and company communication.

    Improve Compliance

    As a small business owner, you know your employees, business, and industry like the back of your hand, yet when it comes to federal regulations, you’re likely left scratching your head. After all, it can be challenging for small businesses to stay up to speed on regulations and the changes made to them each year. 

    This past year was no exception, as we saw a few legal changes to health insurance. For businesses with at least 50 employees, business owners must offer the minimum essential health coverage that’s affordable or pay a penalty. In deciding whether to pay or play, keep in mind that penalties will increase by nearly 30 percent in 2020. 

    Outsource Benefits

    Managing healthcare is a timely chore for small business owners that takes them away from focusing on client relationships and workplace satisfaction. Perhaps that’s why so many small businesses have found that the best option is to outsource benefits management to a professional employer organization (PEO). 

    PEOs take on the responsibility of providing and managing things like health insurance, so employers can focus on growing their business. Not to mention, PEOs will also take on the regulatory liability of your employees, so small business owners can have better peace of mind. Working with a PEO also allows small business workers to gain access to big-business employee benefits like wellness programs and health, dental, life and other insurance offerings.

    Get Small Business Health Insurance

    With each passing year, healthcare will only become more complex. Small business owners will need greater support to navigate the changes and develop benefits strategies. 

    Group Management Services (GMS) provides a Master Health Plan, offering small business owners the best healthcare benefits at lower premium costs. We leverage our buying power through mass policies, so small businesses can purchase multiple policies like health, vision, dental and other types of supplemental insurance coverage. Additionally, GMS provides payroll and tax, human resources, and risk management services to further meet your small business needs. 

    Contact GMS today to talk with one of our experts about how your small business can offer quality health insurance at a lower cost.

  • Retirement plans can be a great benefit for small business owners looking to attract and retain employees. But between IRAs and 401(k)s, it can be challenging to decide which is the best plan suited for your organizational needs. For greater ease, some employers might prefer the SIMPLE IRA. For flexibility, though, the variety of choices available in a 401(k) can make this retirement plan a more attractive option. 

    Choosing a retirement plan is often one of the most important financial decisions a business owner can make. To help with your decision, we explained the differences between a SIMPLE IRA and a 401(k) as well as the pros and cons of each retirement savings plan.

     Retirement savings plan.

    What is a SIMPLE IRA?

    A Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA is a tax-deferred retirement savings account that can be established by employers, as well as self-employed individuals. As the name implies, many employers prefer this plan for its simplicity in that it’s quick to set up and ongoing maintenance is straightforward and inexpensive from an administrative standpoint.

    The Difference between a SIMPLE IRA and a Traditional IRA

    While SIMPLE IRAs and Traditional IRAs are similar, SIMPLE IRAs are aimed more toward small business owners and self-employed individuals. With a SIMPLE IRA, employers must match part of their employees’ contribution. Employers have two options for matching according to Motley Fool: They can either match contributions up to 3% of their employees’ compensation, or contribute a fixed rate of 2% of compensation regardless of employee participation in the plan. The contribution limits are also different. The amount an employee contributes from their salary to a SIMPLE IRA cannot exceed $13,500 in 2020 and 2021. Conversely, for a Traditional IRA, the total contribution limit can’t be more than $6,000 in 2020 and 2021 ($7,000 if you’re age 50 or older).

    The Difference between a SIMPLE IRA and a SIMPLE 401(k)

     

    A SIMPLE 401(k) plan is a cross between a SIMPLE IRA and a traditional 401(k) plan. The same eligibility rules that apply to a SIMPLE IRA apply to a SIMPLE 401(k). One key difference is the employer contribution limits. All employer contributions to a SIMPLE 401(k) are subject to a compensation cap ($290,000 for 2021); with a SIMPLE IRA, only non-elective employer contributions are subject to a compensation cap.

    Eligibility

    To qualify for a SIMPLE IRA, employers can have no more than 100 employees who have received at least $5,000 in compensation from the employer for the previous year. There is also no age limit with a SIMPLE IRA, making it available to all employees within the company. By choosing a SIMPLE IRA, employers are not allowed to maintain any other plan. 

    Contributions

    Employer contributions are mandatory with a SIMPLE IRA and are deductible on your business tax return. Regardless of whether an employee contributes, employers must either match up to 3 percent of an employee’s pay or match a contribution equal to 2 percent of an employee’s compensation. For two out of every five years, an employer who elects to make matching contributions has the option to reduce their contribution amount to one that is between 1 and 2.99 percent. With a SIMPLE IRA, all contributions vest immediately.

    As with any retirement savings plan, there are some limits to how much can be contributed to a SIMPLE IRA. For 2020, the annual contribution limit is set at $13,500 (up $500 from 2019) for employees. Workers that are 50 years in age or older can contribute $3,000 more, for an annual total of $16,500. Meanwhile, there is no limit on employer matching contributions, with one exception. Employers using the 2 percent contribution based compensation model can only match their contribution on up to $280,000 salary.

    Administrative responsibilities and fees

    As previously alluded to, there are minimal administrative requirements associated with SIMPLE IRAs. There are no annual tax filing requirements, either – business owners just need to be sure to send annual plan details to employees. Another advantage of SIMPLE IRAs is the low cost of setup and maintenance.

    What is a 401(k)?

    A 401(k) is a defined contribution retirement plan that comes with a lot of flexibility for employers who would like to offer it as a benefit to employees. While this type of retirement savings plan can be more complex to establish and maintain, being able to choose how you want to contribute to employee accounts as well as having the option of a Roth 401(k) can sway employers to select this plan.

    Eligibility

    Any company with one or more employees is eligible to offer a 401(k). However, 401(k)s are limited to employees at least 21 years old who worked at least 1,000 hours in the previous year. 

    Contributions

    Under a 401(k), employees have the option to set aside a portion of their income and invest it in a qualifying retirement account. This money is tax-deferred, meaning that the employee doesn’t pay federal income taxes on their contributions.

    Perhaps one of the biggest advantages of offering a 401(k) is that employer contributions aren’t mandatory. Rather, employers have the option to match none, some, or all of their employees’ 401(k) contributions. Usually, business owners will set limits on how much they’ll match. For example, you might match employee contributions up to 6 percent of an employee’s salary, and only have your contributions fully vest after two years. 

    Employer contributions are deductible up to IRS limits. As of 2020, combined contributions of employee and employer are limited to less than 100 percent of compensation, or $56,000. For workers aged 50 and older, that limit is raised to $62,000. Should an employer chose not to contribute, employee contributions are limited to $19,000, or $25,000 for those aged 50 and older.

    Additional provisions

    In addition to the traditional 401(k) as mentioned above, there are additional provisions that can be made, such as a Roth option or profit-sharing.

    Roth 401(k)

    The option of a Roth 401(k) can be a major deciding factor in selecting this retirement plan. A Roth option for your 401(k) plan allows you and your employees to contribute post-tax earnings toward retirement and face no additional taxes on those savings or investment earnings when the money is withdrawn at retirement. 

    Having the Roth option can be a cost-effective way to make your retirement savings plan more attractive because you and other highly-compensated employees won’t be subject to an income cap. Furthermore, contributions to the account are taxed up-front, rather than at the time of withdrawal. While certainly a plus, the additional tasks associated with the administration and taxation of a Roth 401(k) can be burdensome on a small business. 

    Profit Sharing

    Profit-sharing is another option that can be added to a 401(k) plan with a simple amendment. Profit-sharing allows business owners to contribute pre-tax dollars to employee retirement accounts based on how well their business did in the year. For profit-sharing 401(k) plans, the annual contribution limit is $56,000 per employee (or 100 percent of their salary, if it’s lower). 

    Profit-sharing plans can serve as a great motivation tactic for employees to work hard toward meeting your goals. As with all other types of 401(k)s, implementing a profit-sharing 401(k) plan can also allow small business owners to benefit from lower tax liability, controlled contributions, and improved talent acquisition and retention.

    Administrative responsibilities and fees

    With more flexibility comes greater administrative duties and plan fees associated with 401(k)s. For one, employers that offer 401(k)s are subject to a compliance audit every year to ensure that plans don’t favor highly-compensated employees over those who are paid less. In addition, employers are subject to higher setup and maintenance costs. Generally, plan fees tend to expensive, even more so for small businesses.

    SIMPLE IRA vs 401(k): How to Decide

    As described above, there are many pros and cons to each retirement plan. To help decide which plan is best for your company, ask yourself the following questions:

    Why are you setting up a retirement plan?

    There are many benefits to setting up a retirement plan, which you’re likely considering. For instance, retirement benefits are listed among the most important employee benefits, according to Monster’s 2019 State of the Candidate survey. Beyond employee acquisition and retention, you may be trying to save for your own retirement as a small business owner. Contribution limits may be a factor here, especially for profitable owners who may prefer the 401(k) for the higher contribution limit.

    Will you need to adjust employer contributions?

    In an uncertain economy, mandatory employer contributions can be both a detriment and a benefit to small business owners. While mandatory contributions can certainly help attract employees, maintaining contributions could present some challenges, should your business fall on hard times. That’s where 401(k)s provide an advantage to employers who may need to make adjustments to their contributions in the future. With a 401(k), you would also have the option to set vesting terms, which allows you to require employees to remain employed by you for a set time before taking ownership of your contributions to their accounts.

    Retirement Planning for Small Business Owners

    Offering retirement plans is important to attracting and retaining quality employees, but is a benefit that can come with a lot of complexity and risk. That’s where a professional employer organization (PEO) like Group Management Services (GMS) can help. From cutting costs to reducing stress to saving valuable time, GMS can take on the administrative burdens associated with retirement plans, in addition to other employee benefits and HR responsibilities like payroll, human resources, and risk management, to allow you to focus on growing your business. 

    Contact GMS today to see how we can help make retirement plans simpler for your small business.