Small Business Benefits Planning

Finding and retaining trustworthy, productive employees — never mind motivating them — remains one of the biggest challenges facing business owners today. Compensation is of course a primary driver of employee retention, but a competitive benefits package can be a motivating force as well.

Now that small business group health insurance is prohibitively expensive for most small businesses, employers have been forced to be creative designing an alternative benefit package that will appeal to their employees.

Good employee benefits planning starts with a dialogue with key employees to gain an understanding of the non-health insurance benefits they most value.

An obvious benefit option is an employer-sponsored retirement plan. These benefit plans run the gamut in terms of plan features, contribution limits, and administrative costs. Some plan options — namely profit sharing, cash balance pension and 401(k) plans — can favor the business owner in terms of contribution & benefits over the rank-and-file employees.

A profit share plan can be an especially effective retention tool and enjoys mutually beneficial tax benefits.

Other less sophisticated retirement plans, such as a SEP or SIMPLE IRA plans, feature limited benefits with no owner favoritism, in exchange for sharply reduced plan sponsor expenses and a low administration burden. 

A non-qualified deferred compensation plans is another under-appreciated tool to  “handcuff” key employees from leaving employment using a vesting schedule. Deferred comp plan benefits can be fully customized for each employee and the owner has discretion as to which key employees can participate in the plan. Tax benefits accrue to the owner once the deferred comp is realized by the employee at their retirement.