How To Use SEPS to Attract New Talent

March 05, 2020
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As a small business owner, you need great talent to stay competitive in your industry, but attracting talent can be challenging. While wages are important, you also need an inspiring work environment, the potential for advancement, and a great benefits package which includes a retirement plan. 

While most big companies set up 401(k)s, the paperwork can be prohibitive for small businesses. Luckily, there is another option — a Simplified Employee Pension Individual Retirement Arrangement (SEP-IRA). You can set up a SEP with a one-page form, and taking care of these accounts is easy. 

Check out these tips on how to use SEPs to attract new talent to your business. 

  1. Include SEP Details in Recruitment Materials

People who are looking for jobs want to know as many details as possible before they apply. When a prospective candidate has a sense of the wages and benefits you offer, they can make an educated decision on how much effort to put into pursuing the role with your business. While drafting ads to attract new talent, make sure to mention your SEP plan as well as any other employee benefits. 

  1. Educate Employees About Your SEP Plan   

During onboarding, make sure your employees know about the SEP plan and understand how it works. Typically, with a 401(k), the employees make the bulk of the contributions, and the employer matches some of the contributions, but SEP plans work a bit differently in that only the employer makes the contributions. 

Let your employees know about the contributions you make. This information helps to highlight your value as an employer, while also providing extra comfort about the retirement years. 

  1. Maximize Your Contributions

If attracting and retaining talent is your main objective, you should contribute as much as possible to your employees' SEP plans. As of 2020, you can contribute the lesser of 25% of wages or $57,000 per employee per year. 

Unfortunately, a lot of Americans do not have adequate savings in their retirement accounts, and in fact, 15% of workers have saved absolutely nothing. By maxing out SEP contributions, you can help to set up yourself or your employees for a comfortable retirement. 

  1. Help Employees With Early Withdrawals

Ideally, your employees should save the funds in their SEP account for their retirement, but sometimes, unexpected expenses or emergencies can pop up. In these situations, consider helping your employees with early withdrawals. If they are younger than 59.5 years, they have to pay a 10% penalty plus income tax on the withdrawal, but they don't have to worry about the penalty if they need the funds for certain medical bills. 

Creating a SEP account, maximizing contributions, and helping your employees make withdraws as needed can be a powerful tool for recruitment and retention. Although your business may be small, a SEP helps you compete with the giants. 

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

 

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Source

SEP contribution limits: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-contributions

rules for IRA contributions if have 401k through employer: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-contributions

Making Non-SEP contributions to a SEP: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-contributions

15% of workers saved nothing: https://www.cnbc.com/2019/06/27/how-many-americans-have-nothing-saved-for-retirement.html