I’m looking into starting a SEPP retirement plan, as part of my company benefit package. Just wondering, if anyone else is using one, and how both the owners,and employees feel about such a plan. As some of you know, I was put into a “labor shortage”, a while back. Now, in an effort to recruit and retain employees of a higher caliber, I’m developing some benefits. After almost 20 yrs of working for others, without any benefits, it’s time for a change. Could it be, that part of the bad image that the construction industry has, is due to the lack of benefits, and thereby a lesser quality in the work force? Hmmm? Sure, it affects my costs. But maybe, the increased satisfaction in their job, will increase productivity,and profitability. I feel that a long term employee is more cost effective, regardless of higher cost.So many factors that are involved in the constant turnover of help,can really hurt the business, sometimes without being noticed.
Currently, I’ve been utilizing subs, to fill my labor voids. While this is working well, the scheduling can be limiting, causing me to pass up on profitable projects. Guess I wasn’t cut out to be a “paper contractor”. Been a boss, been solo. I guess boss is better for me. On the areas above. What do you think that we as an industry should do to improve our general image. Yes, I know lots of you are percieved well by the public. But……..
Brudoggie
Replies
I can't comment on the retirement program.....just have a comment on bennies in general. A few short yrs ago....I decided to go from self employ to employee.
I consider myself a top notch carpenter, and conducted my job search as such.
The company I decided to work for.....was one of the few that offered a benefit package. Health and 401K.Paid holidays and vacation. Had talked about profit sharing but that never went thru.
So...I'd say......the idea of attracting a higher level of candidates would be right.
They also have kepth their top lead for about 10 yrs.....10 yrs in which he gets other job offers 2 or 3 times a year...because of the vacation accruded and the health ins...which no one else has offered up front....only offered to match after he tells them that's his package.....then in his mind...why leave what's working for him.....for a lateral move.
Jeff
Buck Construction Pittsburgh,PA
Fine Carpentery.....While U Waite
Our company consists of 3 partners and 5 full time employees. Four of the employees have been with us and average of 10 years. They are all excellent carpenters and can do all phases of construction. We offer health insurance for all employees as individuals and they pick up their families if they want. We have looked into deferred compensation plans but our employees have indicated a desire for higher pay in lieu of these. The ones that want to save (or can) do it themselves. Our success in retaining these top notch workers has less to do with benefits and pay (though these are competitive) than with the opportunity to do top notch work in a pleasant even fun environment.
"less to do with benefits and pay".....more to do with pleasant environment.
Excuse me.........but bullsh!t.
No carp worth anything that provides for his family isn't going to take a fun day at work over money and insurance....and who would want that type of employee?
Take away the competitive pay and health insurance...pass out balloon animals and candy on payday.........and see how many come back next week.
Not saying a good work environment isn't important.....but it'll take a good package to get the good guys in there. That stuff comes out at the interview.
It takes a good environment to keep them there...that stuff comes out after a few weeks/months on the job.
You gotta get then thru the door first.
JeffBuck Construction Pittsburgh,PA
Fine Carpentery.....While U Waite
Lets get real crazy. How about decent benefits, and a good work environment. Am I an idealist, or what? As far as higher pay instead of a retirement plan: I feel many workers, particularly, younger ones, fail to think about the future. Therefore, I'd rather see them encouraged into some kind of plan. Especially if the employer is contributing also! Lets face it. Construction work can really tear up a body. Working as a carpenter, until 65 or 70 years old isn't practical for most folks. Around here, most of them don't even see those ages, sad to say. Hope to see more input here.
Brudoggie
"Excuse me.........but bullsh!t. No carp worth anything that provides for his family isn't going to take a fun day at work over money and insurance....and who would want that type of employee?"
I didn't say that an employee would choose a good work environment over money but, in fact, many do. For instance, every one of our top carpenters could make more money if they wanted to commute more than two hours each day. They choose to work closer to home. So do I. Another example: Many on this forum have suggested charging more for a customer who shows signs of being a PITA. How many of us regret losing those jobs even if we are paid more?
You ask who would want to have an employee whose work is fun. I want that type of employee. I also want him to be competent but why do these two things have to be mutually exclusive? I will not work with an unpleasant person day after day no matter how good a carp he is. I can train almost anyone to do the work if they have a good attitude and if not, why bother at all?
Good for you, BRU.
Planning for retirement is tough. Doing something about is even tougher.
Not enough employers are doing what you're doing.
But specifically...
The SEP. Nice plan. Practically as good as it should be. Real cheep to operate. Keeps the costs down and more money going into the pool. Downside: About 5 years ago, they took away the "employee contribution" portion that made the plan quite like a 401(k). Too bad. Can't borrow, Must make contributions for eligible employees, even if they no longer work for you.
Another downside is the contribution limits. You say that you worked for someone else for 20 years... That means you really only got about 20 more to prepare for retirement. In order to accumulate the size of a pool of assets to fund a decent retirement in only 20 years requires larger regular contributions. Depending upon your expected retirement needs, the higher contribuitory level (percentages and amounts) of the other plans (money pension purchase, 401 (k), profit sharing) may make the difference of the successful retirement.
But let's get real. These limits are big. In order to hit them, you yourself will have to be currently earning $250,000 or more per year. But the higher percentage deferral limits may still make a difference even if you're only doing $50,000 now. Being able to put away 25% of earnings rather than 15 compounds to something significant over 20 years.
Recently some sponsors have fine tuned their 401 (k) plans so they are now more attractive to even the sole businessman. May I suggest you contact a Certified Financial Planner (CFP) so he/she may forward calculate your retirement income needs and back calculate a contribuitory amount than can reasonablly be expected to acheive the goal. If such a Planner is also a securities specialist, an appropriate asset allocation plan to accompany the calculations should mitigate valuation swings that would jeapordize the plan.
Should you find such limits still will not allow for a successful accumulation by the time you're scheduled to put things away, additional means like variable annuities, zero coupon bonds, and this new emphasis on dividends all will contribute towards the end.
Sounds like you've done some homework! For me, this is just one part of retirement planning. The main purpose is as an employee benefit. I am talking with a financial planner, my CPA, and Attorney, regarding this. Trying to find a reasonably easy plan to administer, as I have enough to do already. You're right about the limitations, but the flexibility is nice, as I have a relatively young company. Plus the knowledge of the employees that company participation is based on profitability, could be a good motivator.I.e. what's good for me, is also good for them.Are you a business owner, administering an SEP? If so, what has been the response from your employees? Does it fit their needs? Has it helped in retaining them? As for 20 years left working, Uncle Sam says I have to go at it for another 30 or so. Boy, I hope the old body holds out that long. Thanks for the reply!
Brudoggie
I'm a Certified Financial Planner (CFP tm). I handle a number of SEP's and other plans for small companies among others.
If you want generalities, my experiences show all too often the employer is too stingy. But there are exceptions.
When the employer is too cheep with his contribution, he seems to end up hiring those willing to work cheep. He also seems to want to find ways to maximize his contribution - many times at the expense of the employees. He seems to want to pull too much out of the business and fails to see it slowly collapsing from within. He doesn't have a very good business plan or motivation to improve. Those employees are so starved for income that many times as soon as a vesting period expires, these employees will quit just to get the money.
But I've also seen situations where the employer is very generous, but has unrealistic expectations that this is all its going to take to win his employees love and devotion. He still is a jerk.
The exceptions price their jobs right, despite walking away from some even when things are slow. They focus on how to improve themselves as well as their business - constantly. They set goals, work out plans and schedules on how to meet those goals. Their businesses are properly capitalized and not looted. The real good ones have an amazing ability to communicate with and inspire their hires. It's a guess, but I believe these guys instill confidence and desire to do the work a bit better and treat the customer accordingly. I'm thinking it comforts the customer into accepting a higher price and being happy as well.
Bottomline, a retirement plan is and can be a great employee benefit. One may suit your situation a bit better than another. A Certified Financial Planner can help you determine that.
But the true factor that is going to attract and retain employees is you and how you respect them. But something tells me that you shouldn't have too much difficulty with that.
A final point. Sometimes calling in too many advisors unnecessarily creates confusion, delays, and higher costs.
Unless you plan to create a custom SEP, an attorney is an unnecessary expense. Remember that one of the beauties of such a plan is it's low cost. There are many existing IRS preapprved prototype documents available for free. A custom plan could provide a few bells and whistles, but would cost big to have the thing approved by the IRS before you could implement it.
Your CPA should be consulted to do three things:
1. Advise you on your personal immediate contributions. Immediate can be defined as during the fiscal year.
2. Advise on how it could benefit or inhibit your companies profits.
3. Prepare the 5500's (IRS forms) and/or calculate any top heavy numbers or anti discriminatory testing.
Good luck.
I didn't figure you were a nail bender, like me. You are right about many owners trying to maximize their take. I'm in this for the long haul, and live very simply( inexpesively). Mostly, I don't want to see anyone get the late start in retirement planning that I did. Particularly if they work for me. Hopefully, we pass on all of our experience to employees, not just how to do the job. I'm working with a CFP, who is a longtime friend. As for the other consultants, I've got other meetings scheduled with them, and will include this subject within. My CPA, and Attorney are also customers, and friends of mine. I appreciate you input. If you haven't checked out the"Whole Package" thread, Bob could use your expertice. This is one of the great things about Breaktime, the diversity of the participants! Thanks again!
Brudoggie