The OD Practice Owner’s Guide to Retirement Savings

Offering a retirement savings plan within your practice can be beneficial for both you and your employees, but deciding which plan makes the most sense for your practice can be tricky. We’ve outlined some of the benefits of offering a retirement plan in your practice along with some of the plan options available to practice owners to better equip you to make the best decision for your practice.

Why should a practice owner offer a retirement plan to employees?

• Attract and retain top talent – Offering a retirement plan as an employment benefit can make your practice more attractive to quality applicants. Demonstrating that you are invested in your employees can encourage your employees to be more dedicated to their work and maintain a longer tenure with your practice.

• Contribution flexibility – It is possible to offer a retirement plan within your practice while still maintaining autonomy when it comes to your contributions to employee accounts. Not all plans require employer contributions and some plans allow for contribution variance from year to year, allowing you to determine how much you are comfortable with contributing.

• Potential tax incentives – By offering a retirement savings plan within your practice, you may become eligible for tax incentives, including potential deductions for your practice’s contributions to employee accounts*.

• It’s more affordable than you may think – There are a variety of retirement plan options available, and many are designed with small business owners in mind. Some qualifying administration costs may even be offset by government tax credits.

What types of retirement savings plans can I offer my employees?

• Safe Harbor 401(k) – A Safe Harbor 401(k) plans offers a deferral of up to $19,500, regardless of employee participation levels, and $26,000 for anyone aged 50 years or older. Employers are required to contribute each year but are able to bypass discrimination testing and have higher contribution limits than a SIMPLE 401(K).

• Traditional 401(K) – These plans allow contribution flexibility and increased contribution limits but require greater administrative requirements than a SIMPLE or Safe Harbor 401(K). Traditional 401(K) plans can be used to incentivize long-term employment by adding allocation conditions and/or a vesting schedule to match contributions.

• SIMPLE 401(K) – A SIMPLE 401(k) allows small practices a cost-efficient way to offer retirement benefits to employees. By not requiring employee participation, the SIMPLE 401(k) gives the owner more control over contribution amounts.

• New Comparability 401(k) – A New Comparability 401(k) plan assists a small practice to maximize owner contributions up to the legal limit by allowing an employer to allocate multiple contribution rates to different employee groups.

• Simplified Employee Pension (SEP IRA) – SEP IRAs are designed to provide employers with a simplified means of making retirement contributions for themselves and their employees. SEP IRAs have flexible annual contributions, and only the employer contributes to this type of plan.

• Cash Balance – A cash balance plan combines some features of a defined contribution plan, such as a 401(k) plan, and a defined benefit plan. While traditional defined benefit plans provide for a specific benefit at retirement, a cash balance plan provides the benefit at retirement in the form of an account balance.

What options do I have if I’m an independent contractor or a practice owner looking for a retirement plan for myself?

• Owners 401(k) plan – Owners 401(k) plans can be inexpensive to set up and provides you the flexibility to decide each year whether or not to contribute, as you are not limited by employee contribution restrictions as you would be by a traditional 401(k) plan.

• Cash Balance – A cash balance plan combines some features of a defined contribution plan, such as a 401(k) plan, and a defined benefit plan. While traditional defined benefit plans provide for a specific benefit at retirement, a cash balance plan provides the benefit at retirement in the form of an account balance.

Choosing the best retirement savings plan option for your practice doesn’t have to be complicated. Complete this form to connect with AOAExcel’s endorsed retirement program specialists, Equitable Financial, to receive a complimentary financial review. They’ll help identify the best retirement savings plan option to meet your goals for your practice.

*Talk to your Certified Public Accountant (CPA) for tax advice.

Please be advised that this article is not intended as legal or tax advice.  Accordingly, any tax information provided in this article is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.  The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.

Issuer:  Equitable Financial Life Insurance Company, NY, NY.

Equitable is the brand name of the retirement and protection subsidiaries of Equitable Holdings, Inc., including Equitable Financial Life Insurance Company (NY, NY); Equitable Financial Life Insurance Company of America, an AZ stock company with main administrative headquarters in Jersey City, NJ; and Equitable Distributors, LLC. Equitable Advisors is the brand name of Equitable Advisors, LLC (member FINRA, SIPC) (Equitable Financial Advisors in MI & TN). The obligations of Equitable Financial and Equitable America are backed solely by their claims-paying abilities.

GE-3601754 (5/21) (Exp. 5/23)