Small business owners currently have several different retirement plan options from which to choose, including the SIMPLE IRA, SEP-IRA, and 401(k) plans. To help you compare the various options available, we have devised a chart for your convenience. Please review this chart to see which plan includes the elements most suitable for your business.

Such plans will typically fall into one of two categories:

• Plans which are funded by employer contributions (such as the SEP-IRA) where the business will contribute an identical percentage of payment for both you and any eligible employees who partake in the program.
• Plans which are funded by employer contributions as well as employee elective deferrals (these programs include the SIMPLE IRA and 401 (k) plans) on a tax-advantaged basis. These programs afford employees the opportunity to defer a portion of their salary toward funding their retirement goals.

Small Business Plan Options

SEP-IRA Plan Plan Benefits Plan Drawbacks Typical Business Users Simple. All contributions are invested in seperate IRAs for each employee. Flexible. Employers can change their SEP contributions to suit their cash flow. The amount contributed can vary from year to year, and the employer can also skip a year. Lost Cost. Allows employers to provide a valuble retirement benefit without the complicated administration and high cost typically asociated with company sponsored retirement plans. 100% Vested. No annual IRS Form 5500 Series. Easy to set up and administer, offering flexibility as to whether a contribution is made and the amount. Ideal for self-employed people and small-business owners who wish to make tax-deductible contributions of up to 15% of their income, while maintaining complete contribution flexibility each year. In general, you must contribute the same percentage of pay for yourself and any eligible employees. Funded soley by employer; contributions are 100% vested immediately; employees can withdraw assets for any reason. Firms with few or no employees, including individuals who do either full-time or part-time freelance work. Sole Proprietorships Partnerships Corporations Non-Profit Entities

SIMPLE IRA Plan Plan Benefits Plan Drawbacks Typical Business Users Easy. All contributions are invested into individual accounts for each employee. Portable. Employees can redirect accounts after two years. Flexible. Matching formula for employer's contribution. Low Cost. Reduced administratvie requirements, limited regulatory reporting. 100% Vested. No Annual IRS Form 5500 series required. No contributions required for emplyees not participating. Allows for pretax employee deferrals with less administration (no ACP/ADP testing, no top-heavy rules). An employee savings program that in some ways resembles a 401(k). Employees can make pretax contributions throiugh payroll deduction of up to $6,000 per year. Employers pay minimal administration costs and direct all contributions to individual SIMPLE IRAs. Employers-matching contributions are mandatory and 100% vested. Company may not maintain any other plan. There is a 60-day employee-notification requirement. Businesses with predictable income, since employer contributions are required each year. Employers with 100 or fewer employees, including: Sole Proprietorships, Partnerships, Corporations and Non-Profit Entities.

401(k) Plan Plan Benefits Plan Drawbacks Typical Business Users Pre-Tax Contributions. A participant's current federal income taxes are lower, with salary defferal amounts vested 100%. Higher Limits Than SIMPLE IRAs. Each year participants can shelter as much as $10,000 (1998 limits). Loan Provisions Available. Certian Employees Can be Excluded. For example, employees who work less than 1,000 hours during the year. Vesting for Employer Contributions. Employees can be required to complete one year of service to participate in the plan. Employer contributions can be vested based on years of service. Pretax employee deferrals up to $10,000 allows employer-matching contributions, vesting schedules, and flexibility for emplyer contributions. Allows employees to make pretax contributions through payroll deduction of upto $10,000 per year or 25% of pay, whichever is less. Unlike SIMPLE IRA Plans, employer contributions are discretionary and a vesting schedule can be used. Administratively more difficult than other plans (ACP/ADP testing required). Annual IRS Form 5500 required. Companies interested in designing a plan to meet their specific needs. Sole Proprietorship Partnerships Corporations Non-Profit Entities

Money Purchase Plan Plan Benefits Plan Drawbacks Typical Business Users Maximum Deducation. Employers can achieve the maximum deducation of 25% of total plan compensation. Loan Provisions Available. Certain Employees Can be Excluded. For example, emplyees who work less than 1,000 hours during the year. Vesting for Employer Contributions. Employees can be required to complete one year of service to participate in the plan. Employer contributions can be vested based on years of service. Highest contribution amount available. Similar to profit sharing plans but not as flexible, allows higher deductible contributions upto 25% of pay. A business must contribute a fixed percentage of pay each year. The contribution rate you choose when you establish plan can only be changed by plan amendment. Annual contributions are required. No pretax employee deferrals. Annual IRS Form 5500 Series required (in most cases). Business owners with predictable income who wish to contribute more than 15%. Can be "piggy-backed" with a profit sharing plan to maximize contribution. Sole Proprietorship Partnerships Corporations Non-Profit Entities

Profit Sharing Plan Plan Benefits Plan Drawbacks Typical Business Users Flexibility. Employers can change their contributions to suit their cash flow. Contributions can vary from year to year, but they must be substantial and recurring over the years. Loan Provisions Available. Certain Employees Can be Executed. For example, employees who work less than 1,000 hours during the year. Vesting for Employer Contributions. Employee can be required to complete one year of service to participate in the plan. Employer contributions can be vested based on years of service. Business owner decides each year if the business contributes and how mush it contributes, up to 15% of each participant's pay. Profit sharing plans can include such features as loans and vesting schedules that are not available with a SEP-IRA. Lower contribution limit than a money purchase plan. No employee deferrals. Annual IRS Form 5500 Series required (in most cases). Business owners desiring considerable flexibility. Can be "piggy-backed" with a money purchase plan to maximize contribution. Sole Proprietorship Partnerships Corporations Non-Profit Entities

Plan Option Flowchart

Which retirement plan is right for your company? Use this Roadmap to help you decide.

Use our Retirement Planning Calculator to help you get a better handle on just how much you'll need to enjoy the retirement you're working hard for.