Retirement Plan Types

SIMPLE - IRA

SIMPLE-IRA

Target or Typical Plan Sponsor

• All businesses with fewer than 100 employees.

Advantages

• Pre-tax retirement savings with easy administration.
• No tax filings required.

Funded By

• Employee and employer.

Eligibility Requirements

• Employees earning $5,000 in two prior years.

Maximum Annual Individual Contribution

• 100% of compensation up to $16,500 (indexed).
• Additional $3,500 catch-up if age 50+ (indexed).

Maximum Annual Employer Contribution

Choice of two required contributions:

1. Match 100% up to 3% of compensation.
2. OR 2% contribution to all eligible employees.

Match can be reduced in 2 out of 5 years.

No additional employer contributions are allowed.

Vesting Schedule and Conditions

• 100% immediate vesting.

Discrimination Testing & Govt. Reporting

• ADP: No
• Top Heavy: No
• Govt. Reporting: No

Loans Available

• No

When to Establish

• No later than October 1st.

SEP - IRA

SEP-IRA

Target or Typical Plan Sponsor

• All businesses.

Advantages

• No filing requirement.

Funded By

• Employer.

Eligibility Requirements

• May impose age 21 with any service in three out of five years.

Maximum Annual Individual Contribution

• Not applicable.

Maximum Annual Employer Contribution

• 25% of eligible compensation, not to exceed $70,000 (indexed).

Vesting Schedule and Conditions

• 100% immediate vesting.

Discrimination Testing & Govt. Reporting

• ADP/ACP: No
• Top Heavy: Yes
• Govt. Reporting: No

Loans Available

• No

When to Establish

• Prior to tax filing deadline plus extension.

Solo Roth 401(k)

Solo 401(k)

Target or Typical Plan Sponsor

• All businesses with no common law employees.

Advantages

• Ability to contribute maximum individual deferral plus 25% of eligible income.
• No tax filings until assets exceed $250K.

Funded By

• Employee and employer.

Eligibility Requirements

• Varies depending on situation.

Maximum Annual Individual Contribution

• 100% of income up to $23,500 (indexed).
• Additional $7,500 catch-up if age 50+ (indexed).

Maximum Annual Employer Contribution

• 25% of eligible employee compensation.
• Individual eligible employee compensation is limited to $350,000 (indexed).
• Total individual contributions may not exceed $70,000 / $77,500 if catch-up eligible (indexed).

Vesting Schedule and Conditions

• 100% immediate vesting.

Discrimination Testing & Govt. Reporting

• ADP/ACP: No
• Top Heavy: No
• Govt. Reporting if >$250K.

Loans Available

• Yes

When to Establish

• Prior to tax filing deadline plus extension.

401(k) Plan

401(k) Plan

Target or Typical Plan Sponsor

• All businesses (except governmental agencies).

Advantages

• Effective tax tool and employee benefit with employer control.
• Roth contributions allowed.

Funded By

• Employee and employer.

Eligibility Requirements

• May impose age 21 and 1 year of service with 1,000 hours.

Maximum Annual Individual Contribution

• 100% of compensation up to $23,500 (indexed).
• Additional $7,500 catch-up if age 50+ (indexed).

Maximum Annual Employer Contribution

• 25% of eligible employee compensation (indexed).
• Individual compensation limit: $350,000 (indexed).
• Total contributions may not exceed $70,000 / $77,500 if catch-up eligible (indexed).

Vesting Schedule and Conditions

• Vesting schedule available.
• Employer contributions may require 1,000 hours of service and/or employment on the last day of the plan year.

Discrimination Testing & Govt. Reporting

• ADP/ACP: Yes
• Top Heavy: Yes
• Govt. Reporting: Yes

Loans Available

• Yes

When to Establish

• Prior to tax filing deadline plus extension.

Safe Harbor 401(k) Plan

Safe Harbor 401(k) Plan

Target or Typical Plan Sponsor

• All businesses (except governmental agencies).

Advantages

• Great for small, family-owned businesses avoiding ADP/ACP and Top-Heavy tests.
• Roth contributions allowed.

Funded By

• Employee and employer.

Eligibility Requirements

• May impose age 21 and 1 year of service with 1,000 hours.

Maximum Annual Individual Contribution

• 100% of compensation up to $23,500 (indexed).
• Additional $7,500 catch-up if age 50+ (indexed).

Maximum Annual Employer Contribution

Choice of one Safe Harbor Match formula or SH NonElective:

1. (a). Basic Match 100% up to 3% of compensation plus 50% of next 2% of compensation.
   (b). Enhanced Match 100% up to 4% of compensation. (The enhanced match is easier to explain and setup on payroll).
2. OR Contribution of 3% of compensation to all eligible employees.

Vesting Schedule and Conditions

• 100% immediate vesting on Safe Harbor contributions.
• Additional discretionary employer contributions may have vesting schedules.

Discrimination Testing & Govt. Reporting

• ADP/ACP: No
• Top Heavy: No
• Govt. Reporting: Yes

Loans Available

• Yes

When to Establish

• No later than 3 months prior to plan year end.

Profit Sharing Plan

Profit Sharing Plan

Target or Typical Plan Sponsor

• All businesses, typically as an add-on to a 401(k) plan.

Advantages

• Often added to a 401(k) giving the sponsor the discretion to contribute a total of 25% of eligible plan compensation. 
• Contribution amounts can vary greatly among owners and eligible employees.

Funded By

• Employer.

Eligibility Requirements

• May impose age 21 and 1 year of service with 1,000 hours.
• 2 years if 100% vesting.

Maximum Annual Individual Contribution

• Not applicable.

Maximum Annual Employer Contribution

• Discretionary up to 25% of eligible compensation.
• Compensation limit: $350,000 (indexed).
• Total contributions may not exceed $70,000 (indexed).

Vesting Schedule and Conditions

• Vesting schedule available.
• Employer contributions may require 1,000 hours of service and/or employment on the last day of the plan year.

Discrimination Testing & Govt. Reporting

• ADP/ACP: No
• Top Heavy: Yes
• Govt. Reporting: Yes

Loans Available

• Yes

When to Establish

• Prior to tax filing deadline plus extension.

Cash Balance Plan

Cash Balance Plan

Target or Typical Plan Sponsor

• Highly profitable businesses with consistent profit patterns.

Advantages

• Allows owners 40+ to contribute much higher annual amounts.
• Paired with 401(k) plans to exceed $400,000 per person.

Funded By

• Employer.

Eligibility Requirements

• May impose age 21 and 1 year of service with 1,000 hours.

Maximum Annual Individual Contribution

• Not applicable.

Maximum Annual Employer Contribution

• Mandatory, based on age and wage.
• Owner contributions often adjusted every 3–5 years.
• Wages limited to $350,000 (indexed).
• Contribution levels may exceed $400,000 per person depending on age/income.

Vesting Schedule and Conditions

• Vesting schedule available.
• Employer contributions usually not subject to service requirements to pass discrimination tests when paired with 401(k).

Discrimination Testing & Govt. Reporting

• ADP/ACP: No
• Top Heavy: Yes
• Govt. Reporting: Yes

Loans Available

• Yes

When to Establish

• Prior to tax filing deadline plus extension.