Friends,
As an employer, you have multiple options for providing a retirement plan. Certain factors, such as the age of the business, number of employees, and cost, are important to consider when evaluating which retirement plan is right for your business. This week, we will focus on the benefits a SIMPLE IRA and SEP IRA could provide for your business.
SIMPLE IRA
A Savings Incentive Match Plan for Employees IRA is for businesses with less than 100 employees. 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 (e.g., 401(k) plans). This reduced administrative burden can reduce the plan's operating costs.
- Employees are able to contribute up to $16,500 for 2025, with an additional $3,500 contribution allowed for those over 50
- For participants aged 60-63, the catch up is $5,250 in lieu of the $3,500
- Employers must offer either:
- A 3% of employee compensation match on elective deferrals, or
- Non-elective contribution of 2% of compensation
SEP IRA
A Simplified Employee Pension IRA is a type of retirement plan reserved for self-employed individuals or small business owners. You can establish an eligibility requirement that an employee must have worked for the business sometime in the past 3 of 5 years.
- Contribution limit for 2025 is 25% of employee compensation up to $70,000
- The employer makes all contributions on behalf of employees
- Generally, there is no annual filing requirement from the IRS: easy to set up and maintain
Please let us know if you would like to discuss these options in more detail for your business.
Andrew