Plan Comparison

Plan TypeOverviewTypical Plan SponsorEmployer AdvantagesConsiderations
SEP IRA
• An IRA is established for
each eligible employee
• Employer makes all contributions
• Generally, a plan for small
businesses and the self-employed
• Employer contributions up to
lesser of 25% compensation
or $55,000*
Plan may be most
appealing to those
businesses with 10
employees or fewer that
want to:
• Make all contributions
• Have contribution flexibility
• Minimize administrative
expenses
• Company contributions are
generally federally taxdeductible
• Easy administration
• No requirement on frequency
and amount of contributions
• Typically no employer
administration fee
• Minimal paperwork
• Less flexibility than qualified plans — no loan
provisions, no vesting, no Roth contributions
• May be established up until the extended due
date of the employer’s tax return
• May require the employer to cover employees
that would be excludable under standard 401(k)
plan provisions
SIMPLE IRA• Employees can only defer up to
$12,500* ($15,500* if over age 50)
• Employers contribute either by
matching up to 3% of each
eligible employee’s salary or
contributing 2% of all eligible
employees’ salaries,
regardless of participation
• Employer cannot maintain any
other qualified plan
Plan may be most
appealing to businesses
with fewer than 100
employees (including
self-employed) that want
to:
• Minimize plan expenses
• Minimize
administrative
responsibilities
• Make a set employer
contribution
• Company contributions are
generally federally taxdeductible
• Easy administration
• No compliance testing or annual
Form 5500 filing needed
• Typically no employer
administration fee
• Minimal paperwork
• An annual employer contribution is required
• Less flexibility, and cannot offer another plan in same year
• No loans, vesting or Roth contributions allowed
• Must establish between Jan. 1 and Oct. 1
• May require the employer to cover employees
who would be excludable under standard 401(k)
plan provisions
401(k) & 403(b)• Employees can defer up to
$18,500* ($24,500 if over age 50)
• Employers may make matching or
profit sharing contributions
• Employee/Employer contributions
cannot exceed $55,000*
All businesses, except
governmental agencies, that
want to:
• Benefit key employees
• Have contribution flexibility
• Have plan flexibility
• Company contributions are generally
federally tax-deductible
• The most flexible plan design
• Additional profit-sharing
contributions allowed that may
be subject to vesting
• Administrative costs may be offset
by tax, coverage or savings from
vesting schedule
• Tax credit available to firsttime
retirement plan
sponsors
• A higher level of participation by non-highly compensated
employees may be necessary for owners or other highly
compensated employees to defer the maximum salary
deferral contributions allowed
• Allow for Pre-Tax and Roth employee contributions
• Greater administrative requirements; Form 5500 and
special IRS testing to ensure plan does not favor highly
compensated employees

401(k) – 403(b)

  • Employees can defer up to $18,500* ($24,500 if over age 50)
  • Employers may make matching or profit sharing contributions
  • Employee/Employer contributions cannot exceed $55,000

Sep IRA

  • An IRA is established for each eligible employee
  • Employer makes all contributions
  • Generally, a plan for small businesses and the self-employed
  • Employer contributions up to lesser of 25% compensation or $55,000

Simple

  • Employees can only defer up to $12,500* ($15,500* if over age 50)
  • Employers contribute either by matching up to 3% of each eligible employee’s salary or contributing 2% of all eligible employees’ salaries, regardless of participation
  • Employer cannot maintain any other qualified plan

Please Note:  All information is based on 2018 IRS limits. For informational purposes only.