Retirement Plans for Businesses There are several retirement plans available to businesses. Even though the plans have similarities, each has unique requirements and features. What plan is best of your particular business depends on your objectives. Here is a list of the primary plans offered: 401k - for-profit companies Simple 401k - for businesses with fewer than 100 employees 403b - for non-profit businesses ONLY Simplified Employee Pension (SEP) Simple Plan (IRA) Payroll Deduction IRA Additional Plans Profit Sharing Plan Defined Benefit Plan 412i Plans Employee Stock Ownership Plans (ESOP) Below is a list of questions to use to narrow the choices: Do you want to: Pay administration costs each year? Make an employer contribution to the employee accounts? Want a vesting schedule for the employer contributions? Make the maximum contribution for owners and highly compensated employees? Read about 412i Plans and ESOPs Allow the employees to be able to contribute their money? Limit the eligibility of new employees? Base the contributions on money going end or the income needed at retirement Employer Contributions There are two types of plans that allow the employer to make contributions. One set allow employer only contributions. The other set allow the employer and the employee to both contribute. Whether the contribution is mandatory or not depends on whether a primary objective of the plan is to allow maximum owner or highly compensated employee contributions. The Simple IRA requires employer contribution and provides the option of 2% for ALL employees that are eligible 3% match for employees that participate The 401k does not require any employer contributions The employer can contribute dollars deciding each year the amount to contribute Safe Harbor 401k Due to ERISA requirements, each year a calculation must be done to make sure the plan is not top heavy The bulk of the money in the plan cannot belong to the highly compensated (HCE) and owners The highly compensated are limited to the average of the non-highly compensated plus 2% non-participants count as 0% in the calculation and are included A Safe Harbor 401 allows everyone to contribute to the maximum without the HCE calculation Requires the employer to contribute to the 401k for each employee Two Options 3% of income for everyone whether they participate or not A matching of 100% if the employee contributes 3%, then a 50% match for 4% and 5% contribution (if an employee contributes 5% of income, the employer contributes 4%; 3% + 50% of the next two percents)