Minding Ag's Business

More Help on the Fringes

Finding a dedicated work force is no easy task, especially in states like Nebraska where the latest unemployment rates run 2.7%--and the Dakotas, Minnesota and Iowa, all at 3.8%. But fringe benefits can help, as DTN's Elizabeth Williams describes in her current Labor Pains installment, "Help on the Fringes" (subscribers can see it in Recent Features).

Lori Culler, a human resources specialist and owner of AgHires in Temperance, Michigan, encourages grain operations as small as a few thousand acres to consider employee retirement plans.

If you farm in a highly competitive job market, offering a retirement plan is a way to recruit and retain better talent, Culler says. If you have loyal workers who have been with you 30 or 40 years, it’s a way to prepare for the potentially higher costs once their working years end. “In the corporate world, there’s lots of education on what living costs are when you retire. On the farm side, not so much,” she says.

One rule of thumb for city folks is that you’ll need about 80% of your working wages once you retire. Unfortunately, key farm workers often spend more, because they won’t have access to a free pickup, utilities, office cell phones, cheap rent or the occasional sides of beef and pork some farms provide as tax-free perks, she notes.

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“Year-end bonuses fluctuate too much in our industry, so they may not offer the kind of incentive employers imagine,” Culler adds. “If bonuses are based on farm profitability, management decisions to expand or invest in machinery can affect year-end profits, as can big year-to-year swings in commodity prices.”

Weather and capital improvements are not something employees control, so that can prove frustrating.

She sees more grain and livestock operations implementing Simple IRAs and SEPs (Simplified Employee Pension) IRA to compensate. These differ from a traditional IRA in that the employer contributes some or all of the money into the employee's IRA. They’re also far cheaper to administer and offer fewer regulatory hurdles than 401K plans.

Why use a Simple or SEP IRA over a 401(k) plan? "The biggest advantage is the low cost and ease of administration," Walt Mozdzer with Syverson Strege & Company in West Des Moines, Iowa, tells Elizabeth. "Unlike a 401(k) profit sharing plan, the SIMPLE IRA does not need a plan document, a Summary Plan Description, vesting schedules, or nondiscrimination testing, and is meant to be less of an administrative burden. In fact, there's no need to file an annual informational tax return either."

"Another advantage to the employees is that all employer contributions are 100% vested at all times and participants are not limited to a 401(k) plan's menu of investment options. They can invest in a wide variety of stocks, bonds and mutual funds," says Mozdzer.

In other words, those account balances generally build over time, something a little more predictable than commodity markets or El Ninos.

For more ideas on how to reward your labor pool, read DTN's past installments in the Labor Pains series at http://www.dtn.com/…

Follow me on Twitter@MarciaZTaylor

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