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Retirement Plans That Are Simple to Manage

Updated: Nov 30, 2023



Choosing the right retirement plan for a business is crucial to ensure the financial well-being of employees while minimizing administrative burdens. With numerous options available, it’s essential to select a plan that’s easy to manage and aligns with the company's goals.


SEP-IRAs

A Simplified Employee Pension (SEP) IRA is an attractive option for businesses seeking a straightforward and low-maintenance retirement plan. SEP-IRAs are particularly well-suited for small businesses and self-employed individuals due to their simplicity and flexibility.

Employers are solely responsible for making contributions to employees' SEP-IRA accounts, and they have the option to adjust the contribution amount each year. This flexibility allows businesses to adapt their contributions based on their financial situation. SEP-IRAs also have minimal reporting requirements and relatively low administrative costs, making them an ideal choice for businesses that want a simple and cost-effective retirement plan.


Safe Harbor Plans

Safe Harbor 401(k) plans provide businesses with an easy-to-manage retirement solution that automatically satisfies certain Internal Revenue Service (IRS) nondiscrimination requirements. A safe harbor plan may be ideal if your business doesn’t want to deal with compliance testing. These plans require employers to make contributions to employees' accounts, which can be either matching or non-elective contributions.


In exchange for these mandatory contributions, safe harbor plans are exempt from annual compliance tests, such as the Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests. This exemption simplifies plan administration and reduces the risk of potential penalties or required corrective actions associated with failing these tests.

Additionally, safe harbor plans can be customized to include various investment options and plan features, allowing businesses to tailor the plan to their needs while maintaining simplicity.


SIMPLE IRAs

Savings Incentive Match Plan for Employees (SIMPLE) IRAs offer a streamlined retirement plan solution for small businesses with 100 or fewer employees. These plans are easy to set up and manage, with minimal administrative requirements and reporting.


In a SIMPLE IRA, both employees and employers contribute to the plan, with employers either matching employee contributions up to a specified percentage or providing a fixed non-elective contribution. This setup encourages employees to actively participate in their retirement savings while providing a straightforward and cost-effective solution for businesses. Note that SIMPLE IRAs have lower annual contribution limits compared to other retirement plans, such as 401(k)s. However, for small businesses seeking a manageable and uncomplicated retirement plan, SIMPLE IRAs can be an ideal choice.


Selecting the right retirement plan for a business is essential to ensure employee satisfaction and ease of administration. SEP-IRAs, Safe Harbor Plans, and SIMPLE IRAs are three options that provide simplicity and flexibility, making them attractive choices for businesses seeking manageable retirement plans. By considering the unique needs and goals of a company, businesses can choose the most suitable retirement plan, ensuring long-term success and employee satisfaction.


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