Small Business Retirement Plans | Morgan Stanley at work


Just over half of private sector workers in the United States are covered by an employer-sponsored retirement plan, and few workers save without having one.1 Workers understand the importance of retirement savings and this topic is of increasing concern to legislators. As a result, many states require employers to offer some type of retirement savings plan, and workers seek employment opportunities that offer this type of benefit.

According to a recent report, small businesses cited several top reasons for not offering a pension plan.2 Some companies claim they are not solidly established with consistent cash flow to offer a plan. They worry about potential administrative liabilities and costs associated with settling in, and the theory that workers would prefer cash compensation or better health insurance over retirement benefits. However, with increasing pressure from government and workers to provide a retirement solution, it’s important to know the options available to your small business. You may be surprised to find that offering a retirement solution may not be as expensive and difficult to set up as you think.

Small businesses have several options to choose from when it comes to their employee retirement plan benefits. This article is intended to clear up the confusion about the different pension options, in which we will provide an overview of each type of plan and include a comparison table outlining the main features so that you can make a more informed decision on which solution is right for you. best for your business needs. .

The three most common retirement solutions for small businesses are:

  • 401(k)


A 401(k) plan gives employees tax relief on the money they contribute. Contributions are automatically withdrawn from employee paychecks and invested. The investment options in the plan are selected by you as the employer or delegated trustee, and from this predetermined selection, an employee can choose the funds for their individual 401(k) account. Many companies offer what is called a 401(k) match, in which the employer matches, up to a specified percentage, the employee’s contribution as a benefit and incentive for employees to increase their own contributions. Employer contributions to 401(k) plans are optional.


Simplified Employee Pension (SEP) and Savings Incentive Match Plan for Employees (SIMPLE) IRAs are retirement plans that allow employees to save for retirement before taxes. Compared to a 401(k), SIMPLE/SEP IRAs have fewer plan design options and features, but are easier to set up and administer and offer a cost-effective way for a business to start a retirement plan. . However, employees are responsible for managing their own investments in a SIMPLE/SEP IRA, so it may be a good idea for them to work with a financial advisor who can discuss investment choices as well as savings strategies.

While you may see the value of offering a retirement solution to your employees, you may still have concerns about the costs. There may be tax incentives for your business when you set up a retirement solution. If you’re concerned about the time spent administering the plan, some plans come with pre-selected fund ranges and service providers to oversee performance and complete administrative tasks and responsibilities, leaving you more time to focus on the management of your business.

There are pros and cons to each type of retirement solution, but a 401(k) may offer the most flexibility for your business. Contribution limits are higher than SIMPLE IRA carryover limits, and you can incentivize your employees to save even more by providing matching. Plus, a match gives your company a competitive advantage: According to the U.S. Bureau of Labor Statistics’ National Compensation Survey, of employers who offer 401(k) plans, more than half offer a match. .2 In today’s job market, benefits are becoming increasingly important in attracting and retaining top talent: 78% of employees are more likely to stay with an employer because of their benefits.3

Morgan Stanley at Work offers 401(k) services to small businesses for help you and your employees achieve their retirement plan goals. Plus, working with a provider like Morgan Stanley gives you access to a financial advisor, who can craft a retirement plan that meets the needs of your business and your employees, with diverse investment options to meet varying needs. .

As a small business owner, you can help improve the financial future of your employees by providing retirement benefits and leveraging the plan as an effective tool to attract and retain industry talent. If you already have a SIMPLE IRA program and want to convert the plan to a 401(k), the election must be made by October for the new plan to take effect in the new calendar year.

Speak to a Morgan Stanley financial advisor and your legal and tax advisors about your options and the type of retirement solution that’s best for your business and your employees.

Morgan Stanley at Work helps build financial confidence through thoughtful education to help individuals embrace their future, today.


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