New Rules for Retirement Plans
What the 2006 Pension Reform Act guidelines, which went into effect on Jan. 1, mean for small-business owners and their employees.
A recent survey conducted by PricewaterhouseCoopers Private Company Services (PCS) showed that a majority of chief executive officers of the nation’s fastest-growing private firms are not knowledgeable about the 2006 Pension Reform Act guidelines that took effect on Jan. 1. And although the legislation creates an automatic enrollment feature for employees, only 5% of the CEOs surveyed planned to take advantage of that feature.
“The pension reform act was passed to help companies boost plan participation and do right by their employees,” says Paul Bracaglia, investment advisory partner with PCS. “The lack of knowledge regarding the new guidelines means that…companies are not taking advantage of the opportunity to provide employees with the best options available to help them save for retirement.”
For an entrepreneur with no employees, a solo 401(k) plan tends to be the simplest and least expensive retirement plan to administer, experts say. However, you should research your options thoroughly, particularly if you are considering adding employees as your company grows. Talk to your accountant or tax preparer about the various retirement plans available.
For more information on 401(k)s, visit the IRS Web site.
Photo by Avolore.
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