Choosing the best retirement plan for your small business is important to hiring and keeping the right associates. Offering a retirement plan is a great way for small businesses to attract and retain employees. Retirement plan options also help both employee and small business owners shelter income from taxes while promoting saving for retirement. To accommodate the varied needs of individual small businesses, the tax code offers several types of small business retirement plans. As such, it’s important to compare them against each other to find the best retirement plan for everyone involved.
Simplified Employee Pension Plans (SEP), or SEP IRAs, allow the employee to establish an IRA and the employer to contribute up to 25% of an employee’s compensation each year. There is no employee contribution in an SEP plan. It’s simple, and it’s popular with small family-owned businesses.