What is the right retirement plan for my small business, a SEP or SIMPLE IRA?

When trying to choose a retirement plan for your business, it is important to compare the differences before deciding. Depending on your company’s criteria and needs, one will be a better fit for you. We have created a chart to help you with your evaluation. To learn more how GuidedChoice can help you, click here to learn more.

SEP

SIMPLE

Business Eligibility

Designed for sole proprietors, partnerships, incorporated and unincorporated small businesses, including s-corps and individuals with self-employment income; Businesses with 1 or more employees are eligible.

Companies with a workforce of 100 or less and aren’t participating in any other qualified plan are eligible

Employee Eligibility

Employee is at least 21 years old, has worked for the employer at least 3 out of the last 5 years and has received at least $600 from the employer in the current year

Must have earned at least $5,000 during any 2 years prior to the calendar year of enrollment and expects to receive at least that amount during the current enrollment calendar year. Business can decide on less stringent requirement but not more.

Annual Funding Required

no annual funding required

Yes

Who funds it

Employer Only – this means the employer must fund each employees account and the employee doesn’t contribute anything.

Employer + Employee:
Employer can choose from two options:
1. Contribute 2% of each employee’s eligible compensation – this is called a non-elective contribution
2. Contribute a match that is up to 3% of what the employee is contributing, dollar for dollar. You have an option to lower this percent but can’t be reduced to less than 1% and it can only be reduced for 2 calendar years of the 5 year period ending with the calendar year the reduction is made effective.

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