Frequently Asked Questions
- Should your company sponsor a retirement plan?
- If your company needs to compete in the labor market to attract and retain quality employees, most likely, a retirement plan will need to be part of your overall compensation package. Nationally, most employers spend 3% to 4% of pay for employee retirement benefits according to the latest US Chamber of Commerce survey. After salary and medical care, retirement benefits are most important to employees.
- Isn’t Social Security adequate for most employees?
- Most experts agree, that you will need to replace between 75% to 90% of your current income, adjusted for inflation, to live comfortably during retirement. Social Security benefits provide a greater percentage of income for lower-paid employees, but Social Security alone will not be enough. The table below illustrates the replacement income required for a single worker at different income levels, and how much Social Security will provide:
| Gross Preretirement Income |
Percent of Final Income Required |
Social Security Will Provide |
| $30,000 |
77% |
38% |
| $50,000 |
74% |
32% |
| $70,000 |
81% |
25% |
| $90,000 |
82% |
21% |
- What are the tax advantages?
- Qualified retirement plans provide employers and their employees a host of tax related benefits. Contributions made by employers as well as employees can be tax deductible. As the monies are invested, any accumulated earnings are tax deferred until distributed to the employee. At retirement, there are also significant income averaging benefits that reduce income taxes as lump-sum distributions, as well as tax deferred rollover opportunities to IRAs. In addition, to these tax-related benefits, assets of qualified retirement plans are generally beyond the reach of business, as well as personal creditors.Many smaller employers establish qualified retirement plans to maximize the tax benefits for the business owners. Under these arrangements, contributions for non-owner employees many times can be funded entirely from tax savings.
- How long does it take to set up a plan?
- For a new plan, all related plan and trust documentation must be executed prior to your fiscal year-end if you want to take a deduction for plan contributions for the current tax year. In order for us to properly explore all of the issues that impact the establishment of a qualified plan; meet with your tax advisors; and design the benefit and investment structure that best suits your company, approximately 60 days of lead time is needed.If you are converting your current retirement plan, the timeline typically spans a three-month period, but varies greatly based on the capabilities of your current provider.
- How do I help my employees learn about the plan?
- Benefit Strategies provides communications programs that promote your plan and its features, and also provides educational tools to guide employees through the retirement investing process. The program includes written communications, meeting materials, and interactive tools for your participants.
- How can we get help about our investment alternatives?
- SIGMA Financial Services is our own independently-owned registered investment advisory firm. SIGMA provides investment consultation for plan fiduciaries and investment advice to plan participants for self-directed plans. We can provide market research to assist with asset allocation and investment policy decisions, as well as manager research for mutual fund and individual account managers. For plans designed to comply with section 404(c), we provide a full range of consulting services as well as advisory and co-fiduciary services.
- What about costs?
- Designing the right plan for you and your company, with the most appropriate features and options, at an affordable and competitive cost is our primary goal at Benefit Strategies. We have been custom-tailoring retirement plans for all sizes and types of clients for almost 30 years. Although we do not mass-produce packaged retirement programs, our custom-tailored approach to designing and managing the best retirement plan for you has always been cost effective. For plan sponsors who are serious about providing meaningful retirement benefits for their employees, and managing their plans meticulously to comply with the complex maze of regulations and the highest fiduciary standards Benefit Strategies is your best choice. For additional information, please see our Company Overview.
Benefit Strategies