Small Businesses

Retirement Solutions for
Small Businesses

Small Business 401k plans, Simplified Employee Pension (SEP) and Savings Incentive Match Plan for Employees (SIMPLE) provide small businesses with cost-effective retirement solutions. Designed for companies with fewer than 100 employees, these plans offer tax advantages similar to other retirement options, making it easier for employees to save for their future.

Simplified Employee Pension (SEP)

A SEP plan is straightforward to set up and manage. Employees create their own SEP-IRA accounts, where employers can contribute up to 25% of covered compensation for all eligible employees over 21, including part-time staff. Contributions are always 100% vested, allowing employees immediate access, subject to early withdrawal penalties. Employees can also invest in traditional or Roth IRAs, with some income limitations.

For employers, the primary responsibility is to make contributions by their tax filing deadline, with no ongoing account administration or forfeiture provisions.

SIMPLE Plan

In a SIMPLE Plan, employees can voluntarily contribute to their own IRA, with eligibility for those earning at least $5,000 in any two prior years and the current year. Contributions are capped at $11,500 or 100% of compensation, whichever is less. Employee funds are fully vested, but early withdrawals within the first two years incur a 25% penalty, unless exceptions apply.

Employers match contributions up to 3% of elective deferrals or contribute 2% of all compensation for all employees. There is also a SIMPLE 401(k) version, which allows for stricter eligibility requirements but involves more costly ERISA reporting.

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