Industry Insights

SEPS, SIMPLES & 401(k)s

SEP IRA

(Simplified Employee Pension Individual Retirement Account)

  • Allows for Employers or Business Owners to contribute for themselves and their employees
  • The Employer annual contribution can vary year to year
  • The Employer and Employees must receive contribution at the same percentage of salary
  • Employers can contribute up to the lesser of $57,000 or 25% of their salary for themselves
  • Trustee is responsible for deposits, annual statements and IRS required documents

SIMPLE 401(K)/IRA

(Savings Incentive Match Plan for Employees Individual Retirement Account)

  • Both Employees and Employers can contribute
  • Employees are fully vested in all contributions starting day one of employment
  • No discretionary match and requires the Employer to contribute a set amount to all employee accounts
    • Either dollar-for-dollar matching contributions, up to 3% of employee's compensation or fixed nonelective contributions of 2% of compensation
  • Participants can contribute up to $13,500 or $16,500 if over 50 years of age
  • Accounts are individually managed by Participants

401(k) Profit Sharing Retirement Plan

  • Both Employees and Employers can contribute
  • Graded vesting scheduled is available to keep and reward key employees based on their years of service
  • Discretionary match available, resulting in the ability to do Profit Sharing contributions
  • The maximum contribution limit up to $57,000 or $63,500 if over 50 years of age
  • Participants can contribute up to $19,500 or $26,000 if over 50 years of age on an annual basis
  • Employer contributions are considered a tax-deductible business expense and grow on a tax-deferred basis
  • A Third-Party Administrator oversees the operation of a 401(k) Retirement Plan
SEP IRA SIMPLE 401(k)/IRA 401(k) Profit Sharing Plan
$57,000 Employer Contribution Limit $13,500 Contribution Limit $57,000 Contribution Limit (includes profit sharing)
Participants are 100% vested starting day one No Discretionary Match or Profit Sharing and Contributions are 100% Vested starting day one Discretionary Match and profit sharing with a graded vesting schedule
Owner only S-Corps are limited to 25% of their W2 wages $3,000 Catch-Up Contribution Limit $6,500 Catch-Up Contribution Limit