As a small company owner, you may have always thought that big-company employee benefit packages are out of your reach. But it's tough finding employees -- and you don't want to lose valuable staff members every time the next company rolls into town.

Retirement plans are one of the bigger "perks" that a company can offer. They aren't as fundamental as the more traditional benefits like health insurance, vacation leave and life insurance. However, they have become an increasingly popular option for companies in an increasingly competitive labor market.

Look at it from your employee's standpoint: it has generally been an accepted notion that the average worker will need at least 60 percent of his or her pre-retirement income to maintain the same standard of living upon retirement. The numbers are even higher for low-wage workers.

Because U.S. Social Security payments fall short of providing their standards of living, many Americans realize that they'll have to supplement their predicted future financial situation. Younger workers have even tougher odds, because Social Security benefits are expected to decrease as Baby Boomers continue to retire and the U.S. workforce shrinks.

For companies that can afford them, therefore, retirement plans offer employees an attractive, fairly easy way to save for the future and enjoy some tax advantages as a bonus. As an added benefit, business owners can themselves participate in most of the plans.

To decide where to open up an IRA account, the options seem endless. Most banks, financial institutions, brokerage firms, mutual fund companies, even insurance companies offer dozens of different options, from risky but potentially big-paying funds to lower-risk options. Even more information is available on the web.

For the purposes of this article, we'll be looking at individual retirement accounts, or IRAs, that are geared toward small businesses -- specifically SIMPLE IRAs and SEP IRAs. However, there are other types of investment instruments on the market, including Regular IRAs, which employees establish on their own, and well-known 401(K) plans, which are generally intended for larger companies and more costly to establish. For sole proprietor businesses or the self-employed, there's also the Keogh option, which is like a beefed-up SEP IRA with more complex reporting requirements.

IRA -- For the Long Term

Replacing traditional pension plans of years past, individual retirement accounts, or IRAs, came into being with the Employee Income Security Act of 1974. With tax reform laws of 1997 and 1998, IRAs have become an increasingly popular option.

The whole idea behind the plans is longevity: participants contribute steadily to the plan and accumulate income with the notion that they won't dig into these funds until retirement age, or at least close to retirement age. Therefore, these accounts will usually dole out stiff penalties for early withdraw of funds before age 59 1/2:

 25 percent penalty if withdrawn with less than 2 years of participation

 10 percent penalty if withdrawn with greater than 2 years of participation

The really good news is the tax advantages of these accounts, for both participants and employers. Participants are free from income taxes on the accounts until the funds are distributed (often when they're at a much lower tax bracket), and employers are subject to tax deductions for contributions to the plans.

SIMPLE IRA

According to L. Dean Chavis, a certified financial planner with SunTrust Bank, the Savings Incentive Match Plan (SIMPLE) IRA is essentially a mini-401 K plan.

The plan, available only to employers of under 100, sets aside a portion of an employee's salary, with both employee and employer contributions.

The plan is available to employees with at least $5,000 compensation, Employees may defer a maximum of $6,000, adjusted for inflation, per year.

Employers are required to contribute in one of two ways:

 2 % of employee compensation regardless of employee's deferral rate (maximum employee compensation is $160,000 in 1998, adjusted for inflation)

 100 % match up to 3% o employee salary

Employees may also use a tax-free rollover or transfer from SIMPLE IRA to Regular IRA after they've participated in the program for at least 2 years.

SEP IRAs

Simplified Employee Pension, or SEP, IRAs differ from SIMPLE IRAs in that they are easier to establish and are usually geared to very small businesses, typically between one and 10 employees. The IRS filing requirements are also greatly reduced, with a minimal amount of paperwork relative to the other plans and less hassle come tax time.

Unlike SIMPLE plans, employers bear the entire burden of SEP contribution, although they don't have to contribute the same amount every year and may even skip a year.

The maximum contribution per year is 15 percent of employee compensation or $24,000 per year, whichever is less. Eligible employees can also combine SEP contributions with other IRA contributions in the same account.

As with any large financial decision, it's best to talk to your business banker or financial consultant to sort out which plan will fit your company's individual needs -- and determine how much you're ultimately willing to pay.

Before you sign up, make sure you know what kind of paperwork you'll be faced with and -- very importantly -- what the tax filing requirements are. You may even want to consider outsourcing the maintenance of these funds, although there is an obvious expense associated with this service, as well.

Anna Myers is a freelance business writer.