The partners have a variety of options to choose from. The decision on which plan will best suit the situation of the partnership and its employees needs to take a few things into consideration and land on the option that is most favorable. Some of the factors to consider include the nature of the business, the number of employees, and the ages of the employees, tax benefits that may accrue and whether there is a limit to some contributions. The two most appropriate plans for the partnership are the individual pension plan and the employer-sponsored retirement plan.
The individual plan that would be most favorable for the partnership is the simplified employee pension plan. It is available to small business owners with employees including partnerships. The partners are considered, for purposes of contribution to be employees of the partnership in which case they don’t have to set up a parallel plan for themselves. The amount that is contributed is customized for every employee depending on their net income, and the maximum limit would be favorable for the partners who might want to contribute more because of their ages. The contributions are tax deductible up to a certain set amount. The main disadvantage of this plan is that the minimum amount is low compared to other plans and it may not be very beneficial for the partners particularly.
Delegate your assignment to our experts and they will do the rest.
A SIMPLE IRA plan is also an option for the partners. The partners here are also considered employees for purposes of contribution. The employer has to make matching contributions to the plan according to the law. Looking at the profit margins of the partnership, it may present a challenge for them. Employees aged over 50 years have an option of making deferral payments. The contributions to the plan are tax-deductible. The main disadvantage of the plan is the requirement to pay an annual maintenance fee.
