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Small Business is a Big Deal.

Providing retirement benefits is a great way to attract and retain valued employees.  With a Simple IRA you have the flexibility to contribute to a retirement plan without the administrative costs of a traditional 401(k) program.  Establishing a Simple IRA can also provide you with a tax advantaged way to save funds for your retirement as well.

 
Simple IRA
SEP IRA
Traditional 401(k)
Number of employees
100 or fewer employees earning at least $5,000
Any number of employees earning at least $550
Any number of employees working at least 1,000 hours during the year
Maxiumum deferral

$11,500 under age 50

$14,000 age 50 or older

Maximum 100% of compensation

Employees can't defer. Employer can contribute up to 25% of compensation with an annual max of $49,000

$16,500 under age 50

$22,000 age 50 or older

Maximum 100% of compensation

Required employer contribution Dollar-fordollar match up to 3% of pay, or 2% of pay for all elligible participants (3% of pay match may be reduced to as little as 1% in any two of five years) None required. Same percentage must be contributed for each elligible employee None, unless plan is top-heavy
Vesting schedule No, all contributions are 100% vested No, all contributions are 100% vested For employer contributions only
ADP/ACP discrimination testing? No No Yes (unless safe-harbor plan, or qualified automatic contribution arrangement)
Roth contributions permitted? No No Yes
Early withdrawal penalty 25% first two years of participation, then 10% 10% 10%
Withdrawal of employee pre-tax contributions Unrestricted N/A Restricted
Excludible employees
  • Employees who have not earned at least $5,000 in any 2 prior years, or who are not expected to earn at least $5,000 in current year
  • Employees who have not earned $550 in 3 of the last 5 years
  • Employees with less than one year of service
  • Employees who do not work at least 1,000 hours during the year
  • Federal reporting by employer None None Tax form 5500 needs to be filed annually
    May the employer have other plans? No No Yes
    Are loans allowed? No No Yes

    If you have 100 or fewer employees and don’t maintain another employer-sponsored retirement plan, you can establish a Simple IRA whether you are self-employed or have a qualified business.  For more information on retirement plans or establishing a Simple IRA, contact Alerus Securities at 800.279.3200 in Grand Forks or 800.280.5031 in Fargo.


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