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Investor Insights Blog|Choosing a Small Business Retirement Plan That Will Make Your Employees Happy

Small Business Plans

Choosing a Small Business Retirement Plan That Will Make Your Employees Happy

business owner video call with employees

Just a few years ago, job seekers and employees alike were looking for creative, outside-of-the-box benefits — yoga classes, a beer fridge in the kitchen, napping pods, free lunch Fridays. But today, that’s all changed.

After the economic shutdown of 2020, job seekers and employees are becoming less interested in “nice-to-have” sorts of benefits, and more interested in benefits that offer stability, security and work-life balance. In order to hire and retain star performers in your industry, your benefits need to address those issues. One big one: your retirement plan. 

According to the U.S. Chamber of Commerce, just 53 percent of businesses with fewer than 100 employees offer retirement plans, but in a tough hiring market, that’s a mistake. It can seriously hinder your chances of attracting and retaining the best people. 

Many small business owners just haven’t gotten around to doing the research and selecting the plan that’s best for them and their valued employees. It’s no wonder. You’re wearing many (if not all) of the hats just keeping the lights on.

Choosing a retirement plan can be confusing, especially if your business has recently grown beyond being a solo effort into employing a handful or more people. How do you pick the right plan for you and your employees? Here’s a primer. 

Two great retirement plans for small businesses are the SEP IRA and the SIMPLE IRA. They give employees the security and stability they crave, and are simple for employers to administer. 

For more information, watch “Small Business Retirement Plans: Overview” below: 

Let’s look at SEP and SIMPLE IRAs in more detail. 


Simplified Employee Pension (SEP), is designed for self-employed individuals or small businesses with fewer than 25 employees.

The SEP allows for pre-tax contributions toward retirement without getting involved in a more complex qualified plan such as a 401(k). Other facets of the plan: 

  • Contributions to a SEP are tax deductible and compound tax-deferred until withdrawn, pending that the distribution is taken after the account holder reaches 59 1/2 years of age. 
  • The SEP IRA allows an annual contribution of up to $56,000 in 2019 and $57,000 in 2020. Contributions to a SEP are tax-deductible, and earnings within the account are tax-free until withdrawn. 
  • An employer may contribute up to 25 percent of each employee’s annual compensation (the maximum considered compensation is $330,000 for 2023). 
  • Any employer — whether a corporation, partnership, or self-employed individual — may establish the plan, even if there is only one employee. 
  • Employees must meet ALL of the following requirements: Be at least 21 years of age, have worked for the business during any three of the past five years, and have earned the $650 annual minimum required compensation. 
  • Spouses and children may also participate in the plan and open their own SEP IRAs — as long as they are employees of the company and meet the income requirements. 
  • Advantages include being less complex and costly than a 401(k), it allows individuals to contribute larger amounts and may qualify for larger tax deductions. 


Savings Incentive Match Plan for Employees (SIMPLE) is a plan for small businesses, typically with 100 or fewer employees, that have no other retirement plans.

With a SIMPLE plan, contributions are tax deductible and compound tax-deferred until withdrawn, pending that the distribution is taken after the account holder reaches 59 1/2 years of age. Other facets of the plan: 

  • Employees are always 100% vested in (or, have ownership of) all SIMPLE IRA money. 
  • A SIMPLE IRA allows employee contributions in 2023 of up to $15,500 if you are under age 50, and a catch-up contribution of up to $18,500 if you are 50 or older.
  • Employers are generally required to match each employee’s salary reduction contributions, on a dollar-for-dollar basis, up to 3 percent of the employee’s compensation. 
  • You can deduct SIMPLE IRA contributions for the tax year within which the contributions were made. 
  • You can establish a SIMPLE IRA plan if you meet BOTH of the following requirements: You meet the employee limit (100 or fewer employees who earned $5,000 or more in compensation in the previous year) and you do not maintain another qualified plan, unless the other plan is for collective bargaining employees. 
  • You must take into account all employees who were employed at any time during the calendar year, regardless of whether they’re eligible to participate. 
  • The SIMPLE IRA plan generally must be the only retirement plan to which you make contributions, or to which benefits accrue, for service in any year beginning with the year in which the SIMPLE IRA plan becomes effective. 

Tips on rolling out the new plan to employees 

As with any new benefit option or change in the status quo, communication and training are the keys to success. 

Explain the new plan in a company-wide email 

Tell your employees why you’ve decided to offer a retirement plan and lay out the particulars. Include all of the information and the particulars, including their contributions, how it all works before or after taxes, when they will be vetted, how much you’re going to contribute and anything else about the plan they need to know. 

Call a company meeting 

Sit down either in person or virtually with all of your employees and reiterate the information in your email, giving people time to bring up any questions they may have. Ask the financial pro who is administering your plan to be the person running this meeting. He or she will be armed with answers to all of your employees’ questions. 

Explain any paperwork 

Your employees will have to fill out paperwork to join the plan. Make it as easy as you can for them to sign on the dotted line, walking them through the process if necessary. 

Before instituting a retirement plan, be sure to talk with a financial professional. At Equity Trust, we’re here to help with your account related questions. For more information, download our free Guide to Small Business Retirement Plans. 

Download Small Business Plan Guide


Can I roll over a 401(k) account into a self-directed IRA?

Yes. A self-directed IRA gives you the ability to diversify your portfolio with additional investments that are permitted by the IRS, in a tax-free or tax-deferred environment.


How does the transfer process work?

After you open your account with Equity Trust, the first step of transferring your funds involves contacting your current custodian regarding the transfer. If you don’t have that information, an Equity Trust specialist can contact your current custodian while you are on the line.

If the current custodian requires Equity Trust to initiate the transfer process, you must complete and submit an Equity Trust Transfer From along with a recent statement from your current custodian. The Transfer Form can be submitted when opening your account at Equity Trust, or any time thereafter. You must include a Medallion Signature Guarantee Stamp. Once the Transfer Form has been received, Equity Trust will sign and submit the form to the transferring custodian.


What investment options are possible with an Equity Trust account?

Some of the investments Equity Trust clients make using their self-directed accounts include real estate, tax liens, digital currencies such as Bitcoin, private lending, purchasing notes, private placements, precious metals, forex and other investment options that are permissible under IRS guidelines.

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