When a business gets to the point in its life when the owners know the business is going to survive, it may be time to start thinking about setting up a retirement plan. This is usually when the owner's are making enough money and starting to complain about how much they are paying to Uncle Sam.

There are several different types of retirement plans to consider. The right plan will depend upon how you answer the following questions:

1. How much do you think you will be able to contribute each year if I told you that you can't touch it until retirement?
2. Are you just looking to set aside money for yourself or do you want your employees to be able to participate in the plan too?
3. If you want your employees to benefit, to what extent? The bare minimum necessary to allow you to get to your own contribution target? Or, do you truly want to share profits with some or all of those employees helping you to succeed?

The answers I receive to these sorts of questions go a long way toward making sure the business sets up a plan that will best fit their needs. Too many times I run across companies that have been sold a Cadillac when they needed a pick-up truck or quite frankly should have continued to walk for a few more years!

Either way it is very important for those businesses that have plans to ask themselves why they have the plan and is it serving its purpose. Are you able to put enough away? Are your employees taking advantage of it and recognizing the benefit of saving for retirement? What is the plan costing you? How and what are the service providers, brokers or insurance agents being paid?

Sponsoring a retirement plan adds another level of responsibility onto a business owner's plate. There are all sorts of IRS and Department of Labor rules and regulations that must be complied with and costly consequences for failure to comply. 

Do yourself and your business a favor and take the time to answer the questions raised in this article. The answers will go a long way toward determining whether your company has the right retirement plan!

Dermody, Burke & Brown's Pension Department can assist you with any of your Retirement Plan or other employee benefit plan questions.

The information reflected in this article was current at the time of publication. This information will not be modified or updated for any subsequent tax law changes, if any.