Saving for retirement isn’t always front and center on your mind, in fact it’s likely pretty far down the scale of things to worry about when you’re a small business owner. But I suspect that you DO want to save for retirement, and you DO want to attract the best talent, whether hourly or salaried employees. One simple benefit you can offer is a retirement plan, and there are several to choose from. You also can deduct the money you put into an account for your employees as a business expense. And doesn’t socking away about $53,000 in your personal tax-deferred accounts sound like a win-win?



  • SIMPLE stands for Savings Incentive Match Plan for Employees
  • For 2016, employee contribution limits = $12,500 (over age 50, add a catch-up contribution of $3,000)
  • You must match up to 3% of the employee’s compensation (there are temporary exceptions to the 3%), or give 2% (up to $265,000 of compensation) to all eligible employees including those that made no contributions.
  • Easy setup – use IRS Form 5304-SIMPLE or Form 5305-SIMPLE


  • SEP stands for Simplified Employee Pension
  • Employer contributions are not mandatory, nor are they a specific percent or amount
  • Employees may not contribute
  • 2016 contribution limits are the lesser of $53,000 or 25% of your net income
  • Easy setup – use IRS Form 5305-SEP

 Solo (Individual) 401(k)

  • Max-out contributions as an employee (up to $18,000 or $24,000 if over age 50)
  • Employer contribution up to 25% of your total earnings (a deductible business expense)
  • Total contribution cannot exceed $53,000 in 2016
  • Flexible contribution level
  • , in case the year isn’t turning out how you’d hoped


  • Employee contributions up to $18,000 or $24,000 if over age 50
  • Match employee contributions, on earnings up to $265,000 in 2016
  • Total contribution, employee plus employer, cannot exceed $53,000 in 2016
  • Optionally, you can add profit-sharing
  • Can be tricky with the regulations, so requires an administrator with the associated fees

Profit-Sharing Plan

  • Discretionary, not mandatory, employer contributions, so can contribute in some years and not in others
  • No employee contributions allowed
  • Need to test that the benefit isn’t favored toward the highly-compensated employees
  • 2016 contribution limits are the lesser of $53,000 or 25% of your net income

Given the differences in the plans, each with different setup requirements, I’m sure there will be one that fits you and your business perfectly and will be a useful benefit to employees, especially those that are full-time and more long-term (or providing this benefit may help them to become long-term!).

Have questions on the details of these or other retirement plans? Reach out to us at and we’ll do our best to help!