From simple to cost-effective, there are options for small business owners to plan and save for retirement

83% of all employers say they feel at least somewhat responsible for the financial wellness of their employees.1 This means that selecting a retirement savings plan that balances employee needs and business objectives is a priority for most small business owners. There are a number of viable options available, so it’s important to understand the key benefits, and differences, between common retirement savings plans before making your decision. 

1. Payroll Deduction IRA
With a Payroll Deduction IRA, employees establish an IRA account, either a Traditional or Roth IRA with a financial institution, and then authorize a payroll deduction. The Payroll Deduction IRA is one of the simplest retirement arrangements that a business can have. 


  • Minimal work for employers to set up and the employer has no filing requirements
  • Only employees make the contributions 
  • A business of any size, even self-employed, can establish a Payroll Deduction IRA program 

Things to Consider: 

  • Low contribution maximums may not be enough to meet participant’s retirement goals 
  • No deductions for the business
  • Depending on the type of IRA the Employee has set up, they may (or may not) be able to deduct their contributions 

2. Simplified Employee Pension (SEP) IRA
(SEP) IRA plans allow employers to set aside money in a retirement account for themselves and their employees. A SEP does not have operating and startup costs of conventional retirement plans and allows for contributions up to 25% of each employee’s pay.


  • More flexibility than Payroll Deducted IRA plans; easy to set up and operate
  • Flexible annual contributions - in good years the employer can make larger contributions for its employees and in down times can reduce the amount 
  • No IRS reporting and certain plan testing is not required

Things to Consider:

  • Employer must contribute equally for all eligible employees
  • Employees can’t contribute to their accounts; only the employer can
  • No participant loans permitted and assets can’t be used as collateral
  • Funds are vested immediately

3. Simple IRA
SIMPLE (Savings Incentive Match Plan for Employees) IRA allows employers and employees the opportunity to set aside money in retirement accounts. SIMPLE IRA plans do not have the startup and operating costs of a conventional retirement plans. 


  • Employers and Employees can share the responsibility for their retirement (employees may elect to contribute)
  • Plan sponsors can implement a SIMPLE IRA at low cost and are not subject to IRS reporting
  • Available to any small business, generally with 100 or fewer employees

Things to Consider: 

  • Lack of flexibility in Employer contributions. Employer is required to contribute each year with either a matching contribution (up to 3% of compensation) or contribute a flat 2% of compensation 
  • Generally, lower contribution limits than some other retirement plans
  • Employer can not have any other retirement savings plan 
  • Like SEP IRAs, funds are vested immediately 

4. 401(k)
A 401(k) retirement savings plan is a cost-effective way to offer flexibility to both the employer and the employee. Employees can invest in their retirement through convenient salary deferrals that are generally not taxed until funds are distributed. Flexible plan options give small businesses more opportunities to align a retirement savings plan with company values and culture. 


  • Employers have more flexibility. They can enforce eligibility restrictions, select a vesting schedule, and allow participants to take out loans against their 401(k) savings
  • Employees may contribute more to this plan than under IRA plans 
  • Businesses can better compete in the workplace to attract and retain talented employees 
  • Employer contributions are deductible on the employer’s federal income tax return 
  • A 401(k) plan can have an automatic enrollment feature

Things to Consider: 

  • Administrative costs may be higher than under more basic arrangements 
  • Plan sponsors must perform IRS filing and are subject to nondiscrimination testing
  • Employer chooses a vesting schedule for matching contributions that fits business needs;  Employees are always 100% vested in their salary deferrals 

As an employer, you can be an integral part of your employee’s retirement readiness. Your first steps start with understanding and comparing the various options out there to determine a cost-effective plan that is flexible enough to grow with your business and meet your employee’s needs. CoPilot, a stress-free 401(k) retirement service can point you in the right direction. It isn’t just a 401(k) plan. With CoPilot, you're getting a retirement savings service designed to make it easier for you to understand and work toward retirement goals.

1 2015 Workplace Benefits Report, Bank of America Merrill Lynch.

Rob Bishop – Sr. Manager of Corporate Accounts and Government Savings - - 800-236-7400 x3341

Rob is a subject matter expert on 401(k), retirement savings, state mandates, broker dealers and the overall competitive landscape.