Common workplace-based retirement plans

Although retirement planning may not always be a high priority for busy small business owners, there are plenty of options available to help you start saving for the future. Read on for an overview of common workplace-based plans.

While this isn’t an exhaustive list, it should help you begin to understand the differences among them. We recommend consulting a financial advisor for assistance in selecting a plan based on your business size, capacity, and resources.

  • The first type is a 401(k) plan for employees. These plans allow for multiple participants, meaning you can set one up for all your employees to participate in if they choose to do so. Owners file an annual tax return on the plan, and there are tax benefits for employer contributions, as well as profit-sharing.
  • The second option is an individual 401(k). This type of plan is intended for the owner-only market, so businesses with employees do not qualify.
  • A Simplified Employee Pension, or SEP plan, provides business owners with a simplified method to contribute toward their employees' retirement, as well as their own retirement savings. Contributions are made to an IRA set up for each plan participant (a SEP-IRA). Contributions to a SEP are tax deductible and your business pays no taxes on the earnings on the investments.
  • The final private plan type is another IRA-based alternative called a for Savings Incentive Match Plan for Employees or SIMPLE IRA. Perhaps the best way to describe the SIMPLE IRA plan is as the little brother of the more robust, but more costly, 401(k) plan. With this type of plan, employers are required to provide some level of contribution.

Another reason to consider offering a retirement plan is that you can qualify for a tax credit to offset the cost. In an effort to encourage plan sponsorship, the federal government offers a tax credit of up to $500 per year for the first three years of the plan.

We’ve reviewed some of the most popular work-based plans, but there’s plenty more to learn about retirement options for your small business. For more information, register for one of our retirement events, offered in-person and online! 

This work is supported by the Sam's Club Giving Program.

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