Small Businesses

Unlike a big company 401(k) plan that requires an employer to hire multiple service providers to administer a complex plan, a small business retirement plan is designed to require little from the business owner. Plan documents can be completed in minutes, and employees, if any, generally receive just one notice per year.

Quick and easy to establish

Few administrative requirements

No government reporting/nondiscrimination testing

No fiduciary liability for investments

No ERISA bonding requirements

Benefits for business owners

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With a small business retirement plan, you could save a significant amount of money each year for your retirement and offer a competitive benefit to attract and retain employees. To offset the cost of contributing to your employees’ retirement accounts, you receive a:

Tax-deduction for plan contributions
Tax credit for plan start-up costs or employee education

If you don’t have employees, you can save even more each year in your own account and can still deduct your plan contributions. You also have the freedom to choose whether to contribute each year your business is profitable.

Benefits for employees

Employees typically have a greater chance of financial security in retirement if they have a retirement savings plan at work. Employees more likely to save through an employer-sponsored plan and workplace retirement plan contributions and investment earnings are not taxable until taken out of the plan.

Employees participating in an IRA-based employer plan will have greater flexibility and control over their savings and investments than they would with a big business 401(k) plan. Once contributions are deposited into an employee’s self-directed IRA, the employee may choose to invest in anything permitted by the custodian.

SEP IRA Plan

Type of retirement savings plan for a business that allows the business to make retirement savings contributions for its own employees.

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	Simple IRA Plan	SEP Plan
Key Advantage	Allows salary deferrals with little administrative work	Easy to set up & maintain
Employer Eligibility	Any employer with 100 or fewer employees that does not maintain another plan	Any employer
Contributors	Employee can decide how much salary to defer; Employer is generally required to match upto 3%.	Employer only; Discretionary from year to year but must be uniform for all eligible employees
Maximum Annual Contribution (per participant)	Employee can defer up to $15,500 in 2023, plus $3,000 catch-up contribution if age 50 or older Employer must either match employee deferrals 100% up to 3% of compensation or contribute an amount equal to 2% of each eligible employee’s compensation (including those not making deferrals)	Lesser of 25% of compensation or $66,000 for 2023
Employee Eligibility Requirements	Any time up to due date of employer’s tax return, including extensions	Must cover all employees who are at least 21 years of age, employed by the employer for 3 of the last 5 years & had compensation of $750 for 2022
Withdrawals	Withdrawals permitted anytime; loans not allowed Generally taxable & subject to 25% early distribution tax if under age 59 ½ for first two years of participating, then 10%	Withdrawals permitted anytime; loans not allowed Generally taxable & subject to 10% early distribution tax if under age 59½
Plan Establishment Deadline	Any time between January 1 and October 1 of the calendar year	Any time up to due date of employer’s tax return, including extensions

Get Started

1

Step One

Select the plan type that is the right fit for your business. You may want to consult a tax advisor to help compare your options.

2

Step Two

Complete the plan establishment document and send to Mainstar Trust.

3

Step Three

Notify your employees (if any) about the plan and collect a salary deferral election form from eligible employees, if applicable.

Ready to open a small business retirement plan?

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