Spotlight: Jonathan Caron Construction, Inc.
In my position, I am very fortunate to meet a lot of successful small and medium-sized business owners. Each has their own unique background and origin story, and I like to hear about how their ideas become reality. By any measure, it is difficult to leave the relative comfort of working for a company that offers good benefits and a steady stream of income, and owning your own business comes with its own set of responsibilities, caring for your employees by establishing a retirement plan, for instance.
This month, I’d like to focus on one such local business owner and his decision process in choosing a retirement plan to implement for his company. Jonathan Caron of Jonathan Caron Construction Inc. has been out on his own for about four years. Jonathan is based here in Warrenton and builds custom homes, completes remodels, and even builds custom treehouses. He has built (no pun intended) a great name for himself, and he prides himself on high quality construction as well as keeping in regular contact with his clients with regard to updates, costs, and timelines.
When considering an appropriate retirement plan for his business, he needed to consider several factors. Among them were:
How many employees are in the company?
How long would the owner like to require that an employee work for the company before becoming eligible?
Would the owner and/or employees like to contribute directly from their paychecks?
Would the company like to offer a match contribution, or have the business make contributions on the employees’ behalf?
Jonathan has one full-time employee, and he works with many contractors to complete the various projects his firm undertakes. The contractors with whom he works are not required to be covered, so the plan would only need to be for him and his employee. Because he would like to defer income from his salary, and he is generous enough to offer a match, he chose the SIMPLE IRA. SIMPLE is actually an acronym (even though the plan is simple to set up) that stands for Savings Incentive Match Plan for Employees.
There are several other plan options for Jonathan’s company structure, but the SIMPLE IRA best fit his situation. It allows him and his employee to defer up to $12,500 per year ($15,500 for those over age 50), and the company matches three percent. It operates much like a 401(k) plan at a larger company, but there are no costs for set up and no IRS testing that some plan types are subject to. Further, each participant can choose his or her own investment options, and there is no vesting schedule. This means that the matched portion of the contributions belong to the participants immediately.
There is also some flexibility in what Jonathan can require of his participants. He can allow new employees to participate right away or require them to work for the company for one or two years. He can also exclude short-term employees (like summer help, etc.) that make less than $5,000. And, he can reduce the match in some years, but generally has to keep it at three percent.
The good news for Jonathan is that he can choose a new plan in future years as his company grows. There is no requirement to stick with one plan type for any length of time. Choosing the right plan is not only a good idea for the business owner’s own retirement, it’s also a nice benefit that will help attract and retain quality employees. ϖ