Tax Credit

• The government offers a substantial tax credit to encourage business owners to start a new retirement plan for themselves or their workers. The tax credit equals up to half of the costs of starting up a new qualified retirement plan, and you can continue taking the credit for up to three years, to a maximum of $500 per year. You can carry the credit forward or backward if you cannot use it during the year. To qualify, you must have 100 or fewer employees who earned $5,000 or more in the last year. You cannot restrict all the benefits to management employees only -- your plan must include at least one non-highly compensated employee.
  
  

Tax Deferral

• Congress provides a powerful tax incentive to encourage employers to contribute to qualified retirement plans: The deferral of any taxes on your contributions to retirement plans. This means you do not pay capital gains taxes on any assets within the plans when you sell assets, nor do you pay income taxes on any earnings or interest, so long as the assets remain in the plan.
  
  

Bankruptcy Protection

• When you contribute money to a qualified retirement plan, you are effectively removing it from the business and putting it into a separate account. If the business should go bankrupt for any reason, all the financial assets still held within the business are fair targets for creditors and their lawyers. However, federal law provides for generous bankruptcy protection for the first $1 million dollars in IRAs, and for unlimited amounts held within qualified retirement plans, including 401ks, 403bs, SIMPLE IRAs and SEPs.
  
  

Employee Retention

• A quality retirement plan can be a big factor in recruiting and retaining quality talent. In a competitive job marketplace, you don't want to risk losing your best talent, along with potential knowledge and client relationships to a competing employer because they offer a more generous 401k plan with a better match on contributions. Offering a quality retirement plan can be the difference between keeping talent and losing them to a competitor.