Shop owners who offer a SIMPLE IRA retirement savings plan have until Nov. 1 to decide whether a switch to a 401(k) plan might be right for their business and their employees.

A SIMPLE IRA is a calendar-year retirement savings plan, meaning it cannot be changed mid-year. The Internal Revenue Service requires certain requirements to be met prior to Nov. 1 to change to a 401(k) plan for 2023.

Coley Eckenrode of Virginia Asset Management, an advisor to the 401(k) Multiple Employer Plan (MEP) sponsored by the Society of Collision Repair Specialists (SCRS), said a 401(k) offers employers the ability to defer more income into the plan. A 401(k) has a deferral limit of $20,500, with $6,500 additional for those over age of 50, while the limit under a SIMPLE plan is $14,000, with $3,000 additional for those over age of 50.

A 401(k) also gives employers to add a Roth IRA provision, Eckenrode said, meaning that employees and owners can choose to defer to a Roth plan that offers tax-free growth and tax-free withdrawals in retirement. They can also add profit sharing to a plan, and customize the plan in other ways.

SCRS launched its MEP on April 1, 2019, to “help participating businesses and employees save expenses relevant to their 401k balances, reduce administrative responsibilities for companies and provide fiduciary support.”

After researching the issue, “The Board concluded that as an association we could pull our resources together for leverage to save employees and businesses some of their hard earned money, while reducing the administrative burden and providing fiduciary support,” SCRS says on its MEP website, www.scrs.com/401k. The plan currently has more than $17 million in assets.

SCRS has advisors who are able to help business owners analyze the benefits and cost savings of replacing their current retirement plan offering with the MEP. Visit www.scrs.com/401k to contact the advisory team, and fill out a basic request for more information.

Images

Featured image by designer491/iStock