SIMPLE IRA (Savings Incentive Match Plan for Employees)

• Provides an inexpensive 401(k) alternative to businesses with 100 or fewer employees.
• Employees make pre-tax, salary deferral contributions into IRAs, which are owned and controlled by each employee.
• Investment flexibility of a brokerage account
• Employer must elect annually to make a required contribution in one of two ways:
  • Employer match of employee's salary deferral contribution dollar-for-dollar up to 3% of compensation, or
  • Employer contribution of 2% of each eligible employee's compensation

401(k) Plan

• A 401(k) Plan is a profit sharing plan that allows employees to make a pre-tax salary deferral contribution.
• In addition, the employer may make discretionary contributions in the form of a match or profit sharing contribution.
• Typically, contributions are not mandatory (unless plan is Top Heavy or a Safe Harbor Plan).

Individual 401(k)

With these plans, a future income distribution is promised (or defined) and limited. The account value at retirement is known.

• 401(k) plans are now a viable alternative for any owner-only business (or owner and their spouse, or partnerships).
• An Individual 401(k) plan may allow business owners greater contribution levels when compared to a SEP IRA or Profit Sharing Plan.
• This plan is not designed for businesses with employees or businesses planning on hiring employees.
• Since there are no employee participants, the plan's administrative costs are relatively low compared to traditional 401(k) plans.

Plan Comparison Chart