Changes in tax laws are helping make Shirley Patterson’s job easier, while giving her company’s employees access to more tax-deferred money for retirement.

But this year’s increased contribution limits for certain small-business IRA accounts also come with a price.

Coldwell Banker McGrew Real Estate, 4100 W. Sixth St., offers an IRA program for its employees. From left are John McGrew, chairman; Dennis Snodgrass, sales manager; Mike McGrew, vice chairman; and Gary Nuzum, president.

“People will be able to put away a lot more money on a tax-deferred basis,” said Jason Edmonds of Robert W. Baird & Co. Inc. in Lawrence. “But ultimately, the reverse side of this is the government is trying to give us a lot more responsibility for our own retirement savings.”

Moving retirement savings plans from traditional pensions to 401(k)s and similar investment vehicles is becoming more common these days, and government rules are making it easier and potentially more lucrative.

For Patterson, financial manager at Coldwell Banker McGrew Real Estate in Lawrence, the changes are making her company’s Savings Incentive Match Plan for Employees (SIMPLE) IRA more attractive for employees and potential employees alike.

“When we do interviews, we always discuss our benefits purposefully because we think that’s a way we can be ahead of other places,” she said. “A lot of people are surprised that we do that, and they ask a lot of questions. That’s an attraction.”

How they work

Such company-sponsored plans allow an employee to contribute money on a tax-deferred basis, which the employer agrees to match up to a certain level. Coldwell Banker McGrew, for example, matches up to 3 percent of an employee’s salary that is set aside for retirement.

A year ago, contributions were limited to $6,000 per year. This year, the limit has been bumped up to $7,000.

“Our employees like it,” Patterson said. “This is great for a small company.”

Such plans are available for companies with as many as 100 employees. Coldwell Banker McGrew has 18.

While 401(k) plans continue to be popular for many large companies, the SIMPLE IRA offers regulatory and financial advantages for smaller firms, Patterson said.

“For smaller companies it’s hard to find something that can be administered without a large amount of staffing time,” she said.

The program also serves as a valuable recruiting tool, Patterson said.

“For us, being a small company competing with other small companies in Lawrence, you have to have some sort of worthwhile benefits,” she said. “This is a real benefit. You’re avoiding the federal taxes until you withdraw it. If you’re participating, there’s going to be matching (funds) up to 3 percent.

“There’s no reason not to do it.”

New interest

Coldwell Banker McGrew has set up its program through Robert W. Baird, which makes Edmonds available to employees as an investment adviser. Employees choose how to invest their money, whether it’s in bonds, mutual funds or other vehicles.

“He works with the individual to work toward a goal,” Patterson said. “He becomes their guidance counselor, in a sense, on their investments. It’s great, because most people aren’t knowledgeable in that area.”

And staying on top of retirement savings plans has recently drawn increased attention, with the collapse of energy-trading giant Enron.

Hundreds of Enron employees saw their funds dissolve as their company’s stock evaporated when shady financial transactions came to light. The Enron employees could have shielded themselves from widespread damage by being diversified in mutual funds, but many willingly rode the company’s rapid rise and startling fall on their own.

Coldwell Banker McGrew’s plan may be much different than Enron’s the Lawrence company matches with money, not company stock but the principles of diversification still apply, Edmonds said.

The ability of employees to contribute additional funds each year to their own plans will give them the ability to make informed decisions about their financial futures on their own, he said.

Edmonds expects more SIMPLE plans to start, as businesses recognize the importance of helping their workers move toward financial security.

“After all, we’re mostly a community of small businesses and individuals,” he said.