elaws - Small Business Retirement Savings Advisor

Small Business Retirement Savings Advisor

The information contained in this table is based on current interpretation of the law. Where IRS guidance is pending, assumptions have been made. Seek tax advice for additional rules and complete information.

Based on your responses, you may wish to consider the following options:

Payroll Deduction IRA
401(k)

Please return to the Main Menu for more information on small business retirement savings.

Features \ Options	Payroll Deduction IRA	401(k)	SEP-IRA	SIMPLE-IRA	Safe Harbor 401(k)	Automatic Enrollment Enrollment 401(k)	Profit Sharing	Defined Benefit
Key Advantage	Easy to set up and maintain.	Permits employee to contribute more than in other options.	Easy to set up and maintain.	Salary reduction plan with little administrative paperwork.	Permits employee to contribute more than in other options without annual discrimination testing.	Provides high level of participation and permits high level of salary deferrals by employees. Also safe harbor relief for default investments.	Permits employer to make large contributions for employees.	Provides a fixed, pre-established benefit for employees.
Employers Who Can Provide This Option	Any business with one or more employees.	Any business with one or more employees.	Any business that does not currently maintain any other retirement plan.	Any business with 100 or fewer employees that does not currently maintain any other retirement plan.	Any business with one or more employees.	Any business with one or more employees.	Any business with one or more employees.	Any business with one or more employees.
Employer's Responsibilities Employer's Respon- sibilities	Set up arrangements for employees to make payroll deduction contributions. Transmit contributions for employees to funding vehicle. No employer tax filing required.	There is no model form to establish a plan. Advice from a financial institution or employee benefit advisor may be necessary. Annual filing of IRS Form 5500 required. Also requires annual non-discrimination testing to ensure plan does not discriminate in favor of highly compensated employees.	May set up plan by completing IRS Form 5305-SEP. No employer tax filing required.	May set up by completing IRS Form 5304-SIMPLE or 5305-SIMPLE. No employer tax filing required. Bank or financial institution does most of the paperwork.	There is no model form to establish a plan. Advice from a financial institution or employee benefit advisor may be necessary. A minimum amount of employer contributions is required. Annual filing of IRS Form 5500 is required.	There is no model form to establish a plan. Advice from a financial institu-tion or employee benefit advisor may be necessary. Annual filing of IRS Form 5500 is required.	There is no model form to establish a plan. Advice from a financial institution or employee benefit advisor would be necessary. Annual filing of IRS Form 5500 is required.	There is no model form to establish a plan. Advice from a financial institution or employee benefit advisor would be necessary. Annual filing of IRS Form 5500 is required. Actuary must determine funding obligations.
Funding Responsibility Funding Respon- sibility	Employee contributions remitted through payroll deduction.	Employee salary reduction contributions and/or employer contributions.	Employer contributions only.	Employee salary reduction contributions and/or employer contributions.	Employee salary reduction contributions and employer contributions.	Employee salary reduction contributions and employer contributions.	Employer contribution level can be determined year to year.	Primarily employer; may require or permit employee contributions.
Maximum Annual Contribution Contri- bution Per Participant	Up to $6,000 for 2022. Additional contributions can be made by participants age 50 or over up to $1,000 per year.	Employee: Up to $20,500 in 2022. Additional contributions can be made by participants age 50 or over up to $6,500 in 2022. Employer / Employee Combined: Contributions per participant up to the lesser of 100% of compensation¹ or $61,000 in 2022. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants.	Up to 25% of compensation¹ or a maximum of $61,000 in 2022.	Employee: Up to $14,000 in 2022. Additional contributions can be made by participants age 50 or over up to $3,000 in 2022. Employer: Either match employee contributions $ for $ up to 3% of compensation (can be reduced to as low as 1% in any 2 out of 5 yrs.) or contribute 2% of each eligible employee's compensation.²	Employee: Up to $20,500 in 2022. Additional contributions can be made by participants age 50 or over up to $6,500 in 2022. Employer / Employee Combined: Contributions per participant up to the lesser of 100% of compensation¹ or $61,000 in 2022. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants.	Employee: Up to $20,500 in 2022. Additional contributions can be made by participants age 50 or over up to $6,500 in 2022. Employer / Employee Combined: Contributions per participant up to the lesser of 100% of compensation¹ or $61,000 in 2022. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants.	Contributions per participant up to the lesser of 100% of compensation¹ or $61,000 in 2022. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants.	Per plan terms, employer may permit or require employee contribution.
Minimum Employee Coverage Requirements Require- ments	Should be made available to all employees.	Generally, must be offered to all employees at least 21 years of age who worked at least 1,000 hours in previous year.	Must be offered to all employees who are at least 21 years of age, employed by the business for 3 of last 5 years and earned at least $600 in a year for 2022.	Must be offered to all employees who have earned at least $5,000 in previous 2 years, and are reasonably expected to earn at least $5,000 in the current year.	Generally, must be offered to all employees at least 21 years of age who worked at least 1,000 hours in previous year.	Generally, must include all employees who have not already opted out and those who are at least 21 years of age who worked at least 1,000 hours in previous year.	Generally, must be offered to all employees at least 21 years of age who worked at least 1,000 hours in previous year.	Must be offered to all employees at least 21 years of age who worked at least 1,000 hours in previous year.
Withdrawals, Withdraw- als, Loans and Payments	Withdrawals at anytime ; subject to current federal income taxes and a possible 10% penalty if the participant is under age 59 1/2.	Cannot take withdrawals until a specified event, such as reaching 59 1/2, death, separation from service or other event as identified in plan. May permit loans and hardship withdrawals. Withdrawals may be subject to a possible 10% penalty if participant is under age 59 1/2.	Withdrawals at anytime; subject to current federal income taxes and a possible 10% penalty if the participant is under age 59 1/2.	Withdrawals at any time subject to current federal income taxes. If employee is under age 59 1/2, may be subject to a 25% penalty if taken within the first 2 years of participation and a possible 10% penalty if taken afterwards.	Cannot take withdrawals until a specified event, such as reaching 59 1/2, death, separation from service or other event as identified in plan. May permit loans and hardship withdrawals. Withdrawals may be subject to a possible 10% penalty if participant is under age 59 1/2.	Cannot take withdrawals until a specified event, such as reaching 59 1/2, death, separation from service or other event as identified in plan. May permit loans and hardship withdrawals. Withdrawals may be subject to a possible 10% penalty if participant is under age 59 1/2.	May permit loans and hardship withdrawals. Hardship withdrawals may be subject to a possible 10% penalty if participant is under age 59 1/2. Payment of benefits generally at retirement.	Payment of benefits generally at retirement, may offer participant loans.
Vesting	Immediate 100%	Employee salary reduction contributions vest immediately. Employer contributions may vest over time according to plan terms.	Immediate 100%	Employee salary reduction contributions and employer contributions vested 100% immediately.	Employee salary reduction contributions and most employer contributions vest immediately. Some employer contributions may vest over time according to plan terms.	Employee salary reduction contributions vest immediately. Employer contributions may vest over time according to plan terms.	May vest over time according to plan terms.	May vest over time according to plan terms.
Contributor's Contrib- utor's Options	Employee can decide how much to contribute at any time.	Employees can decide how much to contribute pursuant to a salary reduction agreement. The employer can make additional contribution, including matching contributions as set by plan terms.	Employer can decide whether or not to make contributions year to year.	Employee can decide how much to contribute. Employer must make matching contributions or contribute 2% of each employee's salary up to the set maximum.	Employees can decide how much to contribute pursuant to a salary reduction agreement. The employer must make either specified matching contributions or a 3% contribution to all participants.	Employees, unless they opt otherwise, must make salary reduction contributions specified by the employer. The employer can make additional matching contributions as set by plan terms.	Employer makes contribution as set by plan terms.	Employer makes contributions as set by plan terms.
Features \ Options	Payroll Deduction IRA	401(k)	SEP-IRA	SIMPLE-IRA	Safe Harbor 401(k)	Automatic Enrollment Enrollment 401(k)	Profit Sharing	Defined Benefit

1 Maximum compensation on which contributions can be based in 2022, is $305,000.
2 Maximum compensation on which employer 2% non-elective contributions can be based in 2022, is $305,000.

EBSA | Small Business Retirement Savings Advisor