For many business owners, the decision as to which retirement plan best fits their company proves to be rather challenging. There are several different options with varying advantages and restrictions. The size of business, costs, desired level of employee benefit and plan flexibility are a few factors that owners should consider before choosing the retirement plan for their business.
Two of the most popular plans are highlighted below, but please review the chart explaining additional possibilities.
This is the most widely known qualified retirement plan. The 401(k) plan has historically been associated with large companies as the costs were prohibitive for smaller businesses. We are seeing these costs become more affordable in order to encourage small business participation. They are subject to reporting and administrative testing.
- Employees can contribute up to $19,500 for 2021, with an additional $6,500 contribution allowed for those over 50
- Many offer a Roth 401(k) option within the plan
- Total contributions can reach $58,000 (or $64,500 with the catch-up contribution for those over 50)
This plan is for businesses with less than 100 employees and SIMPLE IRAs are still subject to ERISA rules but are not required to file some of the reporting or administration documents seen in other qualified retirement plans (i.e., 401(k) plans). This reduced administrative burden can reduce costs of operating the plan.
- Employees are able to contribute up to $13,500 for 2021, with an additional $3,000 contribution allowed for those over 50
- Employers must match either:
- 3% of employee compensation on elective deferrals
- or Non-elective contribution on 2% of compensation
We would be happy to discuss all the options if you would like to start a plan for yourself or your business. Feel free to reach out to us with questions.
Matt and Andrew