Decisions on issues such as health care, pension plans and employee benefits can be very difficult for the new business owner. The laws on these issues, especially those concerning pension plans, change constantly. There is a growing number of companies providing these services for your business. The majority of these decisions depend upon the size of your company and its financial constraints. All employers will find, however, that attracting and retaining the best employees in today’s job market will be difficult without offering solid benefits. Some questions you should raise before starting your business follow:
Regarding health care:
- Will you offer a health care plan and, if so, will you deduct health insurance payments from employee checks or pay it yourself?
- Which health care insurance provider best meets your company’s needs?
- Who will be covered under your plan (employees only, dependents also, etc.)?
- Will you offer additional insurance for vision care, dental care, orthodontics, etc.?
Regarding pension plans:
- Will you offer a pension plan/401(k) plan?
- Will you match employee contributions?
- Will you hire an outside service/broker to handle the plan? If so, who should be your service provider?
- What type of plan best suits your needs?
(Many different types of plans are available. The most popular - in order of increasing complexity - are a simple IRA, a basic 401(k) plan, a SEP, and a complex pension and profit-sharing plan. Your CPA or financial planner can further explain the differences between these plans and help you determine which one best suits your needs).
- How will you handle the administration of the plan? For example:
- How often will you and/or your employees contribute?
- Who will handle the transfer of funds?
- How will employees borrow money from their plan funds?
- What percentage of their income will employees be allowed to contribute?
Regarding additional benefit issues:
- Will you offer noncash compensation such as stock options? If so, how often and for what reasons will these be awarded?
- Will you offer benefits to your employees relating to your line of business?
(Employee discounts for retail businesses, free dental work at dentist’s office, etc.)
- Will you choose to offer any of the additional benefits that are increasingly growing in popularity, such as employer reimbursements for child care expenses, moving expenses, education expenses or adoption agency fees?
Most owners of small businesses choose to offer cash compensation only, a simple pension plan (to which the employer may or may not match contributions) and a basic health care coverage plan. The above issues are very complex and you will need the assistance of a CPA, a financial planner/consultant and an attorney to help you determine which plans to offer and how to go about implementing them.
