Compare Small Business Retirement Plans

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SEP IRA	SIMPLE IRA	Profit Sharing Plan	Defined Benefit Plan	Individual 401(k)	401(k) Plan
Who's it for?
Business owners with few or no employees Employers who want flexibility in amount contributed annually	Small companies with 100 or fewer eligible employees Companies that want to allow employees to make salary deferrals and save tax-deferred for retirement	Business owners with few or no employees Businesses that may have variable profits Businesses that may want additional plan features	Highly compensated individuals with few or no employees Those who can contribute $80,000 or more annually for at least five years	Business owners with no employees (other than a spouse) Those who want to make big contributions with flexibility in the amount contributed annually	Businesses of any size who seek a plan permitting higher salary deferrals by employees than other retirement plans Businesses who need a customized retirement solution
Key Features:
Low-cost, easy to administer No IRS reporting or annual funding required Employer must contribute to eligible employee accounts in any year plan is funded	Easy to administer No IRS reporting required Largely funded by employee contributions, but limited employer contribution required	Discretionary contributions may be made Requires more setup and administration than certain other plans Additional features available, such as vesting or waiting periods for participation	Funding limit based on annual target benefit rather than contribution limits Assets can be accumulated over a shorter period of time Requires annual funding commitment	Offers similar benefits of Traditional 401(k) with less administration required May permit greater contributions than SEP IRA or profit sharing plan without the funding commitment required by a Personal Defined Benefit	Funded with elective employee salary deferrals and/or annual employer contributions. Does not need to be funded annually. Requires annual filing of Form 5500, and annual testing to determine that the plan is operating under the terms of the IRS rules for qualified 401(k) plans
Contribution Limits:
Up to 25% of compensation (20% if you’re self-employed¹) or $46,000 for tax year 2008 ($49,000 for 2009) ², whichever is less	Employee: up to 100% of compensation or $10,500² (whichever is less) for tax year 2008 and $11,500 for 2009². Age 50 and over may make catch-up contribution of $2,500 for each tax year 2008 and 2009.² Employer: Can match employee contributions dollar for dollar up to 3% (maximum of $11,500²) or contribute 2% of eligible employees compensation. (up to maximum compensation of $245,000²)	Up to 25% of compensation (20% if you’re self-employed¹) or $46,000 for tax year 2008 ($49,000 for 2009)² , whichever is less	Calculated by actuary as amount required to fund annual target retirement benefit. Up to $185,000 for tax year 2008 ($195,000 for 2009)	Up to 20% of self-employment income, plus additional pre-tax salary deferral of up to $15,500 for tax year 2008 and $16,500 for 2009². Individuals age 50 or over may make an additional catch-up contribution of $5,000 for tax year 2008 and $5,500 for 2009². The maximum combined contribution, including salary deferral cannot exceed $46,000 for 2008 ($51,000 if age 50 or over), or $49,000 for 2009 ($54,500 if age 50 or over).	Employee: up to $16,500 for 2009. Age 50 or older may make catch-up contribution of $5,500 for tax year 2009. Employer: up to 25% of participant compensation. Employer plus employee contributions cannot exceed the lesser of 100% of compensation or $49,000 for tax year 2009. The maximum combined contribution, including salary deferral cannot exceed $49,000 for 2009 ($54,500 if age 50 or over).
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1. This percentage of business net profit, after subtracting the self-employment tax deduction, is equivalent to the employee percentage given.
2. Subject to increase in future years.

(1207-9031)