SMALL BUSINESS RETIREMENT PLANS
| Plan Features | SEP-IRA | SIMPLE IRA | Individual (Solo) 401(k) | 401(k) for Small Businesses |
|---|---|---|---|---|
Who is it for? |
For self-employed individuals and business owners who wish to make contributions for employees at a low administrative cost |
For self-employed individuals and businesses with up to 100 employees who wish to allow both employee and employer contributions |
For one person business owners who want to make the highest contribution possible (for themselves and a working spouse) |
Generally, for employers with fewer than 1,000 employees who wish to offer a cost-effective 401(k) plan |
Key benefits |
Easy and inexpensive to set up and maintain |
A low-cost and easy to administer plan |
Allows for the highest contributions in many cases |
Retirement plan with both employee and employer contributions, allowing sponsor and participant to maximize tax deductions and tax-deferred savings |
What is the maximum employer deductible contribution?* |
25% of total compensation** of all eligible employees |
Employer chooses either: Non-elective contributions of 2% of each eligible employee's compensation** OR Matching contributions of each employee's salary reduction contributions dollar-for-dollar up to 3%*** of the employee's compensation |
25% of total compensation** of eligible participants (i.e., owner, and if applicable, working spouse) |
25% of total compensation** of all eligible employees |
May employees contribute? |
No |
Yes |
Yes |
Yes |
What is the salary deferral limit? |
N/A |
The lesser of: |
The lesser of: |
The lesser of: |
Is the plan subject to a vesting schedule? |
N/A |
N/A |
No |
Optional for the employer |
What are the annual participant fees? |
$20 account service fee for each mutual fund account with a balance below $10,000† |
$20 account service fee for each mutual fund account with a balance below $10,000† |
$20 account service fee for each mutual fund account with a balance below $10,000† |
Varies depending on service structure and plan economics |
What are the IRS filing requirements? |
None |
None |
May require annual IRS Form 5500 |
IRS Form 5500 |
Is the plan qualified? |
No, IRA based |
No, IRA based |
Yes (defined contribution) |
Yes |
What plan eligibility requirements can the employer choose to set? |
Age: Earnings: Years of Service: |
Age: Earnings: Years of Service: |
Age: Earnings: Years of Service: |
Various options generally based on age and service |
What is the plan setup deadline? |
Your company's tax filing deadline (including extensions) |
Generally, anytime prior to October 1 of each calendar year (for existing employers) |
By the end of the initial plan year, generally |
By the end of the initial plan year, generally |
May I still contribute to an IRA? |
Yes†† |
Yes†† |
Yes†† |
Yes†† |
*The maximum deductible contribution for federal income tax purposes.
**Maximum amount of compensation that can be used in determining contribution is $285,000 for tax year 2020 and $290,000 for tax year 2021. This amount is increased periodically for inflation.
***May be as low as 1% in no more than two years out of five consecutive calendar years.
†The $20 account service fee will be waived for the following circumstances: Subscribe to electronic delivery of statements and confirmations (participants can subscribe to paperless delivery via the T. Rowe Price website once their account is established.); maintain an individual combined balance of $50,000 or more for all T. Rowe Price accounts (including mutual funds, Brokerage, and Small Business Retirement Plans); or qualify for T. Rowe Price Select Client Services. If the Participant Account is closed during the year, a $20 closeout fee will be deducted automatically from the proceeds of the total redemption. However, the closeout fee is waived when an account service fee was previously assessed to the participant for that year or when the proceeds are being used for a rollover, transfer or conversion to a T. Rowe Price retirement plan account or T. Rowe Price IRA account.
††Contributions may or may not be deductible.
A retirement account should be considered a long-term investment. Retirement accounts generally have expenses and account fees, which may impact the value of the account. Early withdrawals are subject to taxes and possible penalties. For more detailed information about taxes, consult a tax attorney or accountant for advice.
All investments are subject to market risk, including the possible loss of principal. Mutual funds are subject to management fees and expenses.