Small Business Retirement Plans

Retirement plans for business owners with full time W-2 employees

Small business owners with employees can choose from a SIMPLE IRA, SEP IRA, 401k, or a Defined Benefit Plan. Generally, employer sponsored retirement plans fall into 3 categories:

1) Exclusively Employer Funded

SEP-IRA
The employer makes a contribution for any eligible employees according to a percentage between 0 to 25% of compensation. The percentage is the same for employer and eligible employees.

Defined Benefit Plans
The employer makes the contributions according to a specific formula based on actuarial calculations. The maximum retirement income benefit is $200,000 in 2012.

2) Employer and Employee Funded

SIMPLE IRA
Employees can make a voluntary contribution in 2012 up to $11,500 or $14,000 if age 50+ and the employer makes a mandatory match according to 2 options.

401k
Employees can make voluntary contributions of up to $17,000 or $22,500 if age 50+. The employer has the option of making a company match or a profit sharing contribution. An employer match and/or profit sharing contribution is not required.

3) Exclusively Employee Funded

401k
Employees can make voluntary contributions in 2012 of up to $17,000 or $22,500 if age 50+. An employer match is not required.