Retirement Plan Options for Business Owners and Their Teams

Your retirement plan should do more than check a benefits box.

As a business owner, you are planning for more than one future at the same time. You are building the future of your company, supporting the people who help run it, and preparing for your own financial independence. A well-designed retirement plan can support all three.

For many businesses, the starting point is simple: help employees save, create a competitive benefit, and give the owner a structured way to build retirement assets outside the company. As the business grows, the planning conversation may become more strategic. The right plan can help reward key employees, manage tax exposure, improve retention, and support long-term succession planning.

The best plan is not always the most complex plan or the one with the highest possible contribution amount. The best plan is the one that fits your business, your cash flow, your goals, your employees, and your willingness to manage ongoing administration.

A good retirement plan discussion starts with these questions:

• What do you want the plan to accomplish for the business?
• How important are recruiting, retention, and employee financial wellness?
• How much do you want to save personally outside the business?
• How predictable is your company cash flow from year to year?
• Are you also thinking about ownership transition or long-term succession?

Why business owners offer retirement plans

A retirement plan can become part of your broader business strategy. It can help employees feel more secure, give your company a more competitive benefit package, and create planning discipline for the owner.

• Attract and retain employees. A strong retirement benefit can help your business compete for talent and show employees you are investing in their future.
• Support employee financial wellness. Payroll-based saving makes it easier for employees to start and stay consistent.
• Build owner retirement savings. A plan can help owners save outside the business rather than relying only on a future sale or transition event.
• Create potential tax advantages. Employer contributions are generally deductible, subject to plan rules and tax requirements.
• Prepare for future growth. A plan can evolve as your business adds employees, becomes more profitable, or begins thinking about succession.

When a 401(k) plan becomes the right conversation

A 401(k) plan often becomes attractive when a business wants more flexibility than an IRA-based plan can provide. It can allow employees to save directly from payroll, and it may include employer matching, profit sharing, Roth contributions, automatic enrollment, and other design features.

For owners, a 401(k) can also become the foundation for more advanced planning. If the business is profitable and the owner wants to save more, a profit-sharing feature or a cash balance plan may be layered into the broader plan design. That is why many business owners should not view a 401(k) as only an employee benefit. It can also become part of the owner’s long-term wealth-building strategy.

Cash balance plans: an advanced option for profitable businesses

For the right business owner, a cash balance plan can be one of the most important retirement planning conversations. It may allow the owner to build retirement assets more quickly than a 401(k) or SEP IRA alone, especially when the business is profitable, cash flow is steady, and the owner is closer to retirement.

A cash balance plan is a type of defined benefit plan, but it feels more familiar to many owners and employees because benefits are shown in an account-like format. Instead of simply choosing a contribution amount each year, the plan uses actuarial calculations to determine funding needs based on the plan design, employee census, compensation, age, and other factors.

The important business-owner takeaway is this: a cash balance plan can create larger funding opportunities, but it also brings more responsibility. It generally requires actuarial support, third-party administration, plan testing, investment oversight, payroll coordination, and a willingness to make required contributions over time.

A cash balance plan may be worth discussing if your company is consistently profitable, you want to accelerate owner retirement savings, you have predictable cash flow, and you are comfortable managing a more sophisticated plan design. It may be less appropriate if cash flow is inconsistent, the business is in transition, or you want a simple plan with minimal administration.

Cash balance planning questions for business owners:

• Do you want to save more than a 401(k), SEP IRA, or profit-sharing plan may allow by itself?
• Is the business consistently profitable enough to support required contributions?
• How many employees would need to be covered, and what would the employee cost look like?
• Would this strategy work alongside a 401(k) and profit-sharing plan?
• Are you prepared for actuarial, administrative, investment, payroll, and tax coordination?

Traditional defined benefit plans: still relevant, but less common

Traditional defined benefit plans are pension-style arrangements designed around a promised retirement benefit, often expressed as future retirement income. They can still be useful in certain situations, but many business-owner conversations today focus more on cash balance designs because they present the benefit in a format that feels more like an account balance.

Both traditional defined benefit plans and cash balance plans require actuarial calculations and professional administration. The difference is mainly how the benefit is designed and communicated. For most business owners, the practical question is not whether the plan is technically a defined benefit plan. The practical question is whether the business can support the funding commitment and whether the plan design helps accomplish the owner’s goals.

For 2026, defined benefit plans are subject to an annual benefit limit that helps determine the maximum retirement benefit under the plan. That figure should not be treated as a simple cash balance contribution limit. Cash balance contributions are generally determined through actuarial calculations based on the specific plan and participant data.

ESOPs: when retirement planning connects with succession planning

An Employee Stock Ownership Plan, or ESOP, is different from a standard retirement plan conversation. An ESOP is a qualified retirement plan that invests primarily in employer stock, but for many business owners it is also a succession planning tool.

An ESOP may help create a market for company shares, support shareholder liquidity, preserve company independence, reward employees, and transition ownership over time. For owners who care about legacy, culture, and continuity, the ESOP conversation can be very different from a traditional third-party sale.

That said, an ESOP is not a simple employee benefit add-on. It requires careful planning around valuation, financing, fiduciary governance, employee communication, plan administration, and future repurchase obligations. A business generally needs stable cash flow, a capable management team, and a long-term commitment to the employee ownership structure.

An ESOP may be worth discussing if:

• You own a closely held business and are thinking about succession.
• You want liquidity without necessarily selling to a third party.
• You want to preserve company independence and culture.
• You have a management team that can continue operating the business.
• You are prepared to work with specialized ESOP, valuation, legal, tax, fiduciary, and financing professionals.

Make the plan easy for employees to understand

A strong plan design only works if employees understand it and use it. Clear communication can make the benefit more valuable and help employees appreciate the investment the business is making in them.

• Explain how employees enroll and where to go for help.
• Make the employer match or contribution formula easy to understand.
• Explain vesting in plain language so employees know what is theirs and when.
• Provide periodic education on saving, investing, and staying consistent.
• Review the plan as the company grows or employee needs change.
• For ESOPs, explain employee ownership, valuation, vesting, distributions, and how company performance may affect account values.

Do not overlook your own retirement

Many business owners reinvest heavily in the company and assume the business itself will become the retirement plan. That may work for some, but it can create concentration risk. Your future may depend too heavily on one company, one industry, one buyer, one valuation, or one future transition event.

A business retirement plan can help you build wealth outside the company while also supporting employees. A 401(k), profit-sharing plan, cash balance plan, or ESOP may each play a role depending on your business and personal goals. The key is to design the plan around the business you actually have and the future you are trying to build.

“For most business owners, offering a retirement plan is one of the most effective ways to support employees while creating discipline around the owner’s own retirement. The owners who do best treat personal retirement savings with the same seriousness they bring to business planning.” – Tracy Baughman, SVP, Chief Investment Officer

Where Croghan can help

Choosing a retirement plan does not have to be overwhelming. Croghan’s wealth management team can help business owners compare options, think through owner and employee goals, coordinate with tax and plan professionals, and review whether the plan continues to fit as the business grows.

The right plan should be practical, understandable, and aligned with your business. Whether you are just starting with a simple plan, improving an existing 401(k), considering a cash balance strategy, or beginning to think about succession and employee ownership, the first step is a thoughtful conversation about what you want the plan to accomplish.