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Retirement Plan Analysis For Your Small Business

If you’re the owner of a small business, you’ll doubtless already know that offering a retirement

plan is a great way of attracting and retaining employees. Not only that, but it can also help both

employee and business owner to make tax savings. The tax code as it currently stands, offers a

variety of small business retirement plans, and it’s important to consider them all carefully to

find the right one for you and your employees. Here are some of the options, but to understand

them fully, it’s best to consult with a professional retirement specialist:


Simplified Employee Pension Plan (SEP):


With no employee contribution in this simple, popular plan, the employee sets up an IRA and the

employer contributes up to 25% of the employees compensation each year. This plan is very

popular with smaller, family run businesses.


Savings Incentive Match Plan for Employees (SIMPLE):


If your business employs less than 100 workers, then you can set up a SIMPLE IRA retirement

plan. With less paperwork and no separate administration fees, this efficient plan involves each

employee opening an IRA account, and both employer and employee make contributions to it.

This plan works well for small businesses wanting to offer a retirement plan to a group of



Traditional 401(k):


If you plan to expand your business and want a more flexible approach to how much money you

contribute on behalf of eligible employees, then this retirement plan might be a good option for

you. Allowing employees to set aside some of their salary for retirement purposes on a pre-tax

basis, if you offer this plan to your employees, you’ll be required to file paperwork every year to

make sure that it (and subsequently, you) complies with the regulations put in place by the IRS.

Designated Roth Contributions are also an option with this plan, to enable employees to

contribute some of their salary on an after-tax basis. 


Safe Harbor 401(k)


Similar to a traditional 401(k), this retirement plan reduces administration due to the fact that it

includes either a matching or an automatic employer contribution that permits employees to

contribute the highest amount into their accounts each year. While not as flexible as a traditional

401(k), some smaller businesses might find this plan simpler to operate and find it easier to

comply with IRS regulations. 


Individual 401(k)


If you’re running a business with no common law employees, that has only an owner and where

applicable, a spouse, then this retirement plan might be the most suitable for you. In comparison

to other types of plan, this one might enable the business owner to set aside more income.


For a more detailed and up to date description of all the retirement plans that might be

available to you as a small business owner, reach out to a trusted, professional retirement

plan advisor.