Retirement Plan Options for Small Businesses

Why Offer a Retirement Plan?

A retirement plan can:

• Attract and retain quality employees
• Provide tax advantages for both the employer and employees
• Demonstrate investment in employees' long-term wellbeing
• Help business owners save for their own retirement

Plan Options

SIMPLE IRA

Best for employers with 100 or fewer employees.

Key features:

• Low startup and annual costs
• Simple administration
• Employees can contribute through salary deferrals
• Employer must make either matching contributions (up to 3%) or non-elective contributions (2% of each eligible employee's compensation)
• No annual filing requirements with the IRS

SEP-IRA

Best for self-employed individuals and small businesses with few or no employees.

Key features:

• Only the employer contributes
• Contributions are discretionary - can vary year to year
• High contribution limits
• Minimal paperwork
• No annual filing requirements

401(k) Plans

Available to businesses of any size but involve more administration.

Key features:

• Highest employee contribution limits
• Optional employer matching
• Roth option available
• Attracts talent in competitive markets
• Annual compliance testing and filing requirements

Safe Harbor 401(k)

A variation that eliminates certain compliance testing requirements.

Key features:

• Avoids top-heavy and ADP/ACP testing
• Requires employer contributions (match or non-elective)
• Simplifies administration
• Ensures all employees can contribute up to the annual limit

Choosing the Right Plan

Consider:

1. Number of employees
2. Budget for employer contributions
3. Administrative capacity
4. Employee demographics and preferences
5. Tax planning objectives
6. Your own retirement savings goals

Getting Started

1. Determine which plan type fits your organization
2. Select a plan provider or financial institution
3. Adopt a written plan document
4. Communicate the plan to employees
5. Begin accepting contributions
6. Monitor compliance and filing obligations

Most plan providers offer bundled services that handle administration, compliance, and investing options for a single fee.