The most important things to take into account when choosing a retirement plan for small businesses are the company size, age of workforce, and both employer and employee goals.
The most important things to take into account when choosing a retirement plan for small businesses are the company size, age of workforce, and both employer and employee goals. (Photo courtesy of American Advisors Group)

Labor shortages within the industry are becoming a real problem. According to a ManpowerGroup 2014 Global Talent Shortage Survey, 40 percent of U.S. employers reported difficulty in filling jobs — and the skilled trades are the hardest jobs to fill. Escalating the situation, aging baby boomers are starting to retire at a quickening pace, and the Bureau of Labor Statistics projects the HVAC industry will grow by 21 percent through 2022. The recovering economy also contributes, as there are more job opportunities available for skilled workers. While many contractors are struggling to attract and keep qualified employees, others are reporting great success by offering competitive pay and benefits packages, including plentiful retirement plans.

An Aging Workforce

The U.S. Department of Labor Employee Benefits Security Administration (EBSA) recently hosted a webinar designed to help small business owners choose the right retirement option for their businesses. The webinar was held in partnership with the Internal Revenue Service (IRS), Consumer Federation of America/America Saves, and NACHA – The Electronic Payments Association. The presentation covered three basic retirement plans: Individual Retirement Account (IRA)-based plans, defined-contribution plans, and defined-benefit plans. The most important things to take into account when choosing a retirement plan for small businesses are company size, age of workforce, and both employer and employee goals.

“Small firms with fewer than 100 employees represent approximately 98 percent of all businesses in the U.S.,” said Sarah Holt, supervisory benefits advisor, EBSA, and one of the speakers during the webcast. “Those with fewer than five employees represent about 61 percent. Less than half of those making up the 98 percent had less than 100 employees, and more than half of the 100 employers sponsored plans for their employees. However, there are plans to fit all sizes of business.

“In the job market, obviously, the economy has not done very well in the last few years, but it’s very cyclical, and we are going back up to where it’s difficult to attract and retain the best of the best,” she continued. “Sometimes you have to offer a little bit more as an incentive to keep those employees, and that’s where retirement benefits come into play. It’s a great way for you to help yourself, your business, and employees.”


According to the Department of Labor, defined contribution plans, such as the 401(k), are the most popular retirement option utilized. Defined benefit plans, such as old-style pensions, are determined by a formula based on age, years of service, and the employee’s position. These types of retirement solutions have largely become extinct in today’s world.

Holt noted many companies choose to offer 401(k) plans over other options because of their flexibility. With the 401(k), employees defer a portion of their salaries, and earnings are not taxed until the employee takes a distribution. The employee controls how their money is invested. Most plans offer a spread of mutual funds composed of stocks, bonds, and investments the employee can pick and choose from.

According to Robyn Benedetti, human resources and operations manager, Reitmeier HVAC Services, Tualatin, Oregon, choosing a 401(k) plan was the best option for the company’s 32 employees.

“We went with a 401k plan that is offered and sponsored by our local ABC [Associated Builders and Contractor] chapter. We have a great plan administrator. It has constantly performed at or above the market.

“It’s a very user-friendly, Web-based, one-stop shop that has a wide selection of mutual funds to choose from,” Benedetti explained. “Team members are able to estimate their retirement needs by allocating investments based on risk tolerance and projected retirement age. Our plan administrator is very accessible by phone and provides great customer service.”

Reitmeier matches the first 3 percent of employee contributions. The company encourages employees to participate in the plan by educating them on the value of their participation as well as the true cost of retirement.


Michael Rosenberg, president, Rosenberg Indoor Comfort, San Antonio, said his company chose to offer a Simple IRA Plan. Rosenberg Indoor Comfort currently matches up to 3 percent of its employees’ contributions. However, the match is dependent on how the company performs each year.

“We chose the Simple IRA over the 401(k) due to its simplicity,” Rosenberg said. “There is very little reporting that you have to do and there are no extra fees other than the company’s match. This Simple program is also very flexible. An employee can stop deductions right away if he or she chooses to do so.”

Not all employers qualify to offer a Simple IRA plan — they must have 100 or fewer employees. Company employees can contribute to the plan through payroll deduction. The plan also requires employer contributions by matching employee contributions dollar for dollar up to 3 percent of an employee’s pay or a fixed contribution of 2 percent of compensation for all eligible employees.

“A lot of small businesses tend to have these kinds of plans because they’re cheaper to run and they require less reporting requirements, since they tend to have fewer people in them,” Holt said. “The one drawback is they don’t have a lot of flexibility in plan design.”

“My employees can choose to either participate or not,” Rosenberg said. “They can alter the percent of pay they want to invest at any time. It is best for our business, because we are a small business, and the cost is minimal to participate.”

Rosenberg Indoor Comfort also takes the opportunity to encourage employee participation during a few key company-sponsored events each year. “We talk about how much we contribute during the year at our annual holiday party and summer picnic. We also remind them that thinking about the future is important, and they should plan now. Leaving 3 percent on the table is not a smart thing to do, and if they can afford to participate, they should.”

Educating Employees

With 215 employees, Oliver Heating, Cooling, Plumbing, & Electrical of Morton, Pennsylvania, also chose a 401(k) retirement option, according to Antoinette Coupe, vice president of finance and administration. The company also provides a 25 percent match of the first 3 percent of employee contributions as a payroll deduction. It also offers profit sharing on a discretionary basis at the end of the year, depending on
company profits.

“We think the benefit to the company is taking care of our employees,” Coupe said. “There’s obviously an expense to administer the plan, and the company absorbs that. It’s basically to take care of our employees. We feel they’re the No. 1 asset, and we want to care for them today as well as in the future. Our provider for the last eight years, Fidelity Investment, gives us a really nice array of products our employees can invest in. Everybody’s risk tolerance is different, and they give us an array of investments that can be less risky.”

Oliver employees become eligible to participate in the 401(k) after 90 days of employment. New employees are given information about the retirement plan at the time of hire and then attend a new enrollee meeting right before they become eligible to participate.

“We get anywhere between two to 20 people at this meeting, depending on the time of the year and how many people have been hired,” Coupe said. “Our broker puts on a 30-minute seminar on the benefits of 401(k) and what it can do for you if you have regular savings coming out of your paycheck. You don’t miss the money and it accumulates quickly.”

Employees who have dropped out of the retirement plan are also invited to the enrollment meetings to reeducate them about the plan and see if they would like to re-enroll.

The company also has an active investment committee that meets regularly to evaluate the performance of the funds offered to company employees. The committee meets at least twice, sometimes three times a year, depending on fund performance.

According to Coupe, more than 80 percent of Oliver’s employees participate in the retirement plan. “A 401(k) is a wonderful way to save. Back in the day, when my parents were working, they had pensions. Very few companies offer those anymore, so you really have to educate your employees to take care of their futures, and that’s what the 401(k) plan does. If you’re a young person just starting out in the heating and air conditioning business, and you just put away 5 percent of your pay — even though that may seem like a lot — before you know it, you’ve accumulated a decent amount of wealth that will take care of
you into the future.”

For more information on the different retirement options available for your business, visit

Publication date: 4/27/2015

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