Many small business owners offer SEP or SIMPLE IRA plans as their retirement savings program. One of these plans may be ideal for your business today, but as your business grows, additional retirement program flexibility can be a meaningful enhancement to the employee experience. For instance, a 401(k) plan offers higher contribution rates than SEP or SIMPLE IRAs and includes more options for managing costs and deductions and accessing funds penalty-free. Plus, a 401(k) solution may reduce your administrative burden, transfer certain risks, and reduce your overall plan cost.
Not all companies are eligible for SEP or SIMPLE IRA plans, as it depends on the number of employees. It is important to note, however, that you cannot offer a SEP or SIMPLE IRA plan in the same year as a 401(k), so if you are thinking of making the transition, now is the time.
Contact your trusted Rea advisor to discuss your options.
By Paul McEwan, CPA, MTax, AIFA (New Philadelphia, OH)