Looking for a Simple Way to Reward Employees?

Getting from point A to point B should be simple
Putting a retirement plan into place for your employees should be Simple. [image credit: eglobalis.com]
Ever wonder how some of your peers offer expensive benefits packages to their employees and manage to stay afloat? Have you thought about putting a retirement plan into place to reward your employees, but gotten stuck navigating complicated filing requirements and trying to make sense of confusing language like ERISA, Third Party Administrator, and Form 5500?

The IRS recognizes that it can be both costly and time consuming to set up a 401(k) plan if you’re a small business. Complicated rules such as avoiding being “top-heavy,” choosing between profit-sharing options versus matching options, and high startup costs can be seemingly insurmountable hurdles to putting a retirement plan into place.

For those businesses looking to avoid the complicated, the IRS has a solution – the (appropriately named) Simple IRA. Simple stands for Savings Incentive Match Plan for Employees. It is intended to be an easy, cost-effective way for employers with fewer than 100 employees to reward them and provide access to a retirement plan for their future security.

Unlike the traditional 401(k), a Simple IRA has no annual filing requirements. This might not sound like a big deal, until you see what the form 5500 looks like. Not a lot of fun to have to think about every year. And potentially even less fun to pay someone (a third party administrator) to do.

In addition, most Simple IRAs can be set up with no start up fees to the employer. It’s not uncommon for a mutual fund company to to charge a flat fee in addition to what the third party administrator charges for its services for a 401(k). If an employer intended to offer a match, that’s two gatekeepers she has to pay just to offer her employees free money. Not so with a Simple IRA.


For all their simplicity, there are some trade-offs employers should consider carefully before establishing a Simple IRA.

When establishing Simple IRA plans, employers have the choice to either offer every employee 2% of his pay, or a 3% match if he puts in 3%. For example, if Joe employee makes $50,000 per year, the employer has the option to a) put in $1,000 (2% of Joe’s pay) on top of Joe’s salary, or b) match up to $1500 if Joe puts in $1500 of his own money. Either way, the employer is on the hook to make contributions, and can only reduce the match twice in a 5 year period.

Additionally,  all employees are always 100% vested. That means that the match the employer makes is the employee’s to keep forever, even if they leave the next day. This is quite a contrast to vesting schedules in 401(k) plans, which are designed to give employees incentive to stay – or risk losing some of their 401(k) matching. The even bigger pitfall here is if an employee leaves mid-year and the employer is offering a flat 2% non-elective contribution, because the employer is required to make good on that contribution.

While higher than IRAs, Simple IRA contribution limits are lower than those of 401(k) plans – $13,000 for 2019, compared to $19,000 for 401(k) plans. If there are quite a few employees over the age 50, then you’ll want to consider whether the lower catch-up contribution limit would be detrimental to those getting started saving late.

It’s important to weigh the costs and benefits to any type of retirement plan you’re considering – Simple IRA, 401(k) or otherwise.

The Bottom Line

We’ve only scratched the surface of the ins and outs and of Simple IRAs, their pros and cons, and how they compare to 401(k) plans. If you’re an employer, it’s important to weigh your options carefully before implementing a retirement plan. Not sure where to get started? Check out “Help with choosing a retirement plan” on the IRS’s website, or contact us today to get answers so you can decide what type of plan is best for you.

Free Employee Benefit Available for 2019: Naps

Pictured: how napping can make you feel.

Here’s a riddle: you can’t put a price on it, but it’s tremendously valuable. Without it, you wouldn’t be alive. What is it?

Did you guess “the mind?”

Few things peeve me more about our culture than the value we put on a single key ingredient to a healthy mind: sleep. Isn’t it insane that we still give people 15 minute smoke breaks (one of my first jobs offered two fifteen minute smoke breaks each day) – and yet napping is stigmatized?

I don’t have time to point cite any studies, but you can them up, and you’ve likely heard about what research shows about sleep. Well rested individuals get more done, are more effective and getting things done, and are at a lower risk for a myriad of diseases. In short, if you get plenty of sleep, you’ll be healthier and richer.

When it comes to employee benefits, we offer insurance, gym memberships, onsite cafeterias, retirement plans, company cars, and more. I even read an article recently about businesses building sound-proof phone booths for personal phone calls. Employers offer these things because they know that healthier, happier employees = more productive (read: profitable) employees.

Wait, you want to sleep? Stop being lazy!

Think about how absurd that is. As an employee benefit, it wouldn’t cost more than a mattress pad like these ones available on Amazon and semi-private designated sleeping quarters (i.e., an office.)

But to do all that, we need to stop stigmatizing sleep. Being well rested is not about just “going to bed earlier” (although that certainly helps.) We now know that sleep cycles, when interrupted, results in us feeling more tired and groggy…regardless of how many actual hours of sleep we got.

Don’t get me wrong: this is not me saying “forget the rules! Stay up until 4am! Take a 6 hour snooze after lunch!” Try to go bed at a normal time, and try to get up at a normal time. But if you can’t make that happen, don’t punish yourself. A 20 minute snooze can give your mind that extra push to get you through the rest of your day.

Last week I wrote about us living in an abundant universe. One of those things that is abundant in our universe is time. Therefore, don’t feel bad for giving yourself time to rest. You don’t owe anyone an explanation. If anyone asks why you were sleeping, there’s a simple answer: “I was tired.” If you get pushback, such as, “you need to go to bed earlier,” you can respond, “I did, but I couldn’t sleep.” If you then run into “you have things to get done,” simply respond “no one knows better than me what I need to get done, which is why I wanted to get some rest so I could concentrate.”

I’ll say it. I’m not ashamed. I take naps. I take them during the day. I take them in my office. I take them in my car. I know this totally spoils your image of me (lol) but I promise you that I am a hardworking individual. Sometimes I work so hard that I get tired. And sometimes that getting tired happens at 2:15pm instead of 10:00pm.


Why A Great Benefits Package is Great for Business

This article was originally posted by Scot on LinkedIn in October 2017.

It’s no secret to business owners that finding the right people for the right positions can be a challenge. But finding those people and putting them in place is only part of the battle. What about keeping them?

In pursuing my CFP® designation, one of the best pieces of information I learned was in the employee benefits lesson at Bryant University. While often redundant, hearing the obvious from a different perspective can change the way we approach problems by causing us to think about it a different way. In this case, it was the “four R’s” of employee benefits.

What are they?

Recruit. You want the right people for your job. The criteria may be someone with sales experience, with a glowing, outgoing personality, or with organizational skills. The truth is, the best person for the role will be highly sought after. Something as simple as a retirement plan with company match may compel them to look at your job listing. Or, why would an employee choose your competitor when they can get a subsidized health insurance plan from you? (Yes, health insurance is expensive, but that doesn’t mean you have to pay for the whole thing.) The right benefits package should be attractive enough to appeal to the people you want.

Retain. Why hire them if you don’t want to keep them? (Nevermind temporary and seasonal positions, of course.) According to Gallup, only 3 in 10 millennials are emotionally engaged in their jobs*. On top of that, 60% of them are open to new job opportunities. Benefits are only part of retaining them – but a great culture can only go so far. You have to show them the matter to you. Consider having a 401(k) with a cliff vesting schedule – in other words, the longer they stay, the more of their match they keep. Employee Stock Ownership Plans may make sense to give your employees a sense of ownership – literally – over their roles. Don’t forget about the obvious, such as bonuses, anniversary gifts, and paid vacation days. The more good things on the horizon, the more likely they are to stick around.

Reward. They key to a good reward is that it must be sincere. “The difference between appreciation and flattery? That is simple. One is sincere and the other insincere,” says Dale Carnegie, author of How to Win Friends and Influence People. “One comes from the heart out; the other from the teeth out. One is unselfish; the other selfish. One is universally admired; the other universally condemned.” By genuinely showing our appreciation for our employees, we can command loyalty that our competitors cannot. So, after a grueling week of long hours to meet deadlines – treat them to lunch. Let them leave early. Take them out for drinks. If they’re tired, let them take a nap. Be creative. Think of them as people, not as machines. They’ll link that emotional positivity to being a part of your company.

Retire. It’s no surprise that retirement benefits are on the decline. These days, you’ll find very few companies offering pension plans – the types of plans that promise to pay a person for life after they retire. Many have been substituted (if employees are lucky enough) for defined contribution plans – like the 401(k) – but, many employees don’t even contribute. Part of retiring your employees is being sure you do your part to get them in that direction. Start by offering a great financial education. Help them understand the importance of saving. Invest in a plan with a company match to encourage saving. By investing in a great retirement package, you are showing your employees you want to keep them for life. That upfront cost is well worth it, if you can offset the very high cost of employee turnover.

When considering developing benefits package, many employers struggle with what specific benefits they should offer. The truth is that what benefits they offer don’t matter as long as they fit meet the criteria above. One thing is for sure – there’s no such thing as too many. Don’t forget the four R’s of employee benefits – unless you want your employees to forget you.

I’d love to hear from you: What types of benefits are you considering implementing for your work place? What types of benefits are you happy to have? Comment below!

About the Author:

Scot Whiskeyman is the founder of Providers & Families Wealth Management, LLC, a full-service financial planning and wealth management firm based out of Lemoyne, PA.

*Sources: http://news.gallup.com/businessjournal/191459/millennials-job-hopping-generation.aspx

Should Employers Offer Payroll-Deducted Emergency Funds?

To keep your head above water, keep an emergency cash reserve stocked away (but still in arm’s reach.)

It happens more often that I’ve been able to count: a client leaves a job, and treats their 401k as a cash windfall. They have a reason, and they’ve convinced themselves that it’s a good reason, to rob themselves.

Here is a non-exhaustive list of permission slips savers have written themselves:

  • I need it to pay off debt.
  • We needed some things for the house/kids/yard.
  • My car needed a new engine.
  • It’s just what we needed to do right now.
  • We used it as a down-payment on a house.

The use of retirement funds for non-retirement reasons has become something of an epidemic. People use money intended to take of their future-selves, and, as one individual I met with eloquently put it, “bs” themselves into using it now – in other words, they rationalize an irrational decision. As a result, not only do the pay the IRS a tax penalty, but they pay income tax and rob themselves of compounding interest.

Is this an epidemic that can be controlled by better educating savers on the importance of saving for the future, or is it a symptom of a much larger problem?

In my opinion, it’s the latter. Rather than saving, we have developed a collective mentality of “spend now, pay later.” We spend every last dime of our paycheck, or worse, borrow from ourselves by using credit cards to make ends meet (and more commonly, live above our means.)

Is it any wonder that money once handcuffed is immediately used when it’s set free? After all, it’ll take some pain away…right now. There will be years and years to make up for it.

Here’s the problem: the making up for it never happens. The contract they entered into with themselves containing the open-ended, ambiguous  “someday” clause practically guarantees this. Without clearly defining exactly what day that is and what they are going to sacrifice to make up for it, they’ve effectively only treated the symptom (debt, lack of cash reserve) while the problem (bad habits) remains intact. And the side effect is that they’ve robbed their future selves.

What can we do to stop the epidemic? A new benefit: an Individual Emergency Account (IEA.)

Here’s the rationale: when a financial planner works with a client, one of the first things they should find out is whether or not the client has an emergency fund, or is building one. Without the proper cash cushion, the advisor knows that the plan can collapse very quickly.

Employee benefits packages often include other sound risk-management packages – life insurance, disability insurance, and accidental death and dismemberment policies, just to name a few. But little attention is paid to what the employees are doing to put away for their proverbial “rainy day.” Add to that the 401ks offers hardship – and sometimes, even loan – provisions – it becomes more and more obvious why employees treat their 401k like a bank account.

If we truly want to solve this problem, we should encourage a savings strategy with the sole purpose of covering hardships. What would this plan look like? It’s not exhaustive, but here are a few ideas.

  • Investment Options: an emergency fund is not something to gamble with. At least half – if not most – of the account should be put into an FDIC insured account, not subject to principle risk. Any remaining amount of money should into something low-risk, and very easy to turn into cash – at the employee’s option, of course.
  • Account Maximum: the account should have a roof of 3-6 months of whatever the employee’s salary is. Of course, if they are commission based, the maximum could perhaps be set at the average income of a first year employee. Once the maximum is reached, the employee could be rewarded – perhaps the account could pay them, in a gift card. Perhaps they could be encouraged to maintain their balance but receiving quarterly gift cards each time it is maxed out.
  • Usage. The Individual Emergency Account would need to more broadly define what an emergency is to allow employees access to the funds. They could be required to submit proof of use of the funds to the custodian. Any amount extra that was borrowed could be paid back. The could be penalized if they don’t return it. The emergency would include things such as a car accident, injury, illness of the employee or their loved one, birth of a child, or major car repairs. What would definitely not be considered an emergency: paying off debt, or putting a down payment on a house – things that should be worked towards with good habits.
  • Matching. Employees could receive a small match to encourage them to save, such as 1-2%. Rather than having a long vesting schedule, they could perhaps have a very short 3-12 month vesting schedule, after which it can all be used for an emergency.

Will it ever happen? Maybe. It’s up to employers to ensure that their benefits packages meet the four r’s of employee benefits: recruit, retain, reward, and retire. With a company match and the right incentives, employers could encourage their employees to prepare for a crisis – and what’s more, pay them to prepare for it. The alternative: employees continue robbing themselves for the sake of there here and now.

No one works well under the pressure of fear. Having the right benefits in place means giving employees financial peace of mind, which then leads to better performance. It’s in an employer’s best interest to keep this in mind.

Have an idea for an Individual Emergency Account? Comment below!