NEW YORK — With 2019 more than one-third over, small business owners without employee retirement plans might want to consider starting one before more time passes.
Businesses get tax deductions for the contributions they make to employee plans, and contributions can be as high as $56,000 per employee for 2019. Plans vary in terms of their complexity and cost to set up. And the IRS offers flexibility for when contributions must be made — it’s OK, for example, to make a contribution in 2019 for the 2018 tax year, up until the due date of the owner’s tax return. That means owners who filed for extensions of this year’s March or April filing deadlines still have time to make contributions and get a deduction for last year. And it’s still possible to create one type of plan known as a SEP.
While retirement plans are one of the benefits that help attract and retain workers, surveys and government reports in recent years have shown that many small and mid-size businesses don’t offer them. A 2017 report by the Pew Charitable Trusts said more than 40 percent of full-time workers at these companies did not have access to an employer-sponsored plan.
The Pew report included a survey of more than 1,600 small and mid-sized business owners or managers. More than 70 percent said retirement plans were too expensive to set up, and more than 60 percent said they didn’t have the resources to administer plans.
Members of Congress are trying to increase incentives for small business owners to create retirement plans. A bill that increases the current $500 maximum tax credit for small businesses that set up plans passed the House Ways and Means Committee last month. The bill has bipartisan support, increasing its chances of full congressional approval.
Larger credits might persuade some owners to start plans; the Pew report cited financial incentives as one of the factors that would make starting a plan more attractive.