Retirement Plan Options for Small Business

Employer sponsored retirement plans provide tremendous value to business owners offering a convenient method to save for retirement and are an important part of a comprehensive benefits package to attract quality employees all while providing important tax benefits.   There are several retirement plan options available to suit all businesses from the single-person sole-proprietor or the larger small business owner.   The chart below outlines the key feature of some of the more popular small business plans:

SEP-IRA SIMPLE-IRA Self-Employed 401(k) Eligibility Any self-employed individual or business owner with employees Businesses with 100 or fewer eligible employees who do not currently maintain any other retirement plan Any self-employed individual or business owner with no employees other than a spouse. Key Advantage Easy to set up and maintain Salary reduction plan with less administration Generous contribution limits Funding Responsibility Employer contributions only Funded by employee salary reduction contributions and employer contributions Funded by employee salary reduction contributions and employer contributions Annual Contribution per Participant Up to 25% of compensation. Employee: Up to 100% of compensation, Employer: Either match employee contributions dollar for dollar up to 3% of compensation Or contribute 2% of each eligible employee's compensation Employee: Up to 100% of compensation.Employees age 50 or older can make additional catch-up contributions . Employer: Up to 25% of compensation,       Access to Assets Withdrawals at any time. Withdrawals are subject to current federal income taxes and a possible 10% penalty (if the participant is under age 59½) Withdrawals at any time. If employee is under age 59½, withdrawals generally may be subject to a 25% penalty if taken within the first two years of beginning participation and a possible 10% penalty if taken after that time period. Cannot take withdrawals from plan until a "trigger event" occurs. Vesting of Contributions Immediate Employee and employer contributions vested 100% immediately Employee and employer contributions vested 100% immediately Administrative Responsibilities No employer tax filings No employer tax filings Annual Form 5500 filing