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 |
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 spouse working for the business) |
Generally for employers with 1 or more employees and 0-5M in plan assets who wish to offer a cost-effective 401(k) plan. For businesses with more than $5M in plan assets, see Retirement Plan Services |
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 employee and/or 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 |
$16,000 ($19,500 if age 50 or older) for 2024 and $16,500 ($20,000 if age 50 or older) for 2025 |
$23,000 ($30,500 if age 50 or older) for 2024 and $23,500 ($31,000 if age 50 or older) for 2025 |
$23,000 ($30,500 if age 50 or older) for 2024 and $23,500 ($31,000 if age 50 or older) for 2025 |
Is the plan subject to a vesting schedule? |
100% immediately vested |
100% immediately vested |
Optional for employer contribution |
Optional for employer contribution |
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† |
Annual participant fees vary by plan and consist of an annual plan recordkeeping fee and an annual per-participant recordkeeping fee |
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 |
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: |
Age: Earnings: Years of Service: *1000 hours or more. **403(b) do universally eligibility |
What is the plan setup deadline? |
Your business's tax filing deadline (including extensions) |
Generally, anytime prior to October 1 of each calendar year (for existing employers) |
Your business's tax filing deadline (including extensions) |
Your business's tax filing deadline (including extensions) |
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 $345,000 for tax year 2024 and $350,000 for tax year 2025. 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.
†An annual $20 account service fee is charged for each mutual fund account with a balance below $10,000. The $20 account service fee will be waived for the following circumstances: Subscribe to electronic delivery of statements and confirmations; 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 the T. Rowe Price Summit Program. Participants can subscribe to paperless delivery via T. Rowe Price Workplace Retirement once their account is established. 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 account 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.
††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.
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