Help - Small Business Retirment Plan Options

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ddurrett896
Posts: 1721
Joined: Wed Nov 05, 2014 2:23 pm

Help - Small Business Retirment Plan Options

Post by ddurrett896 »

Have a small business with 10 employees that needs a retirement plan.

SEP IRA: Not a huge fan. As I understand, it's just a blank % of salary applied to all employees - and the % is the same across the board. Love the $69K max though.
Simple IRA: Allows employees to contribute with a matching portion. Only downside is that is caps at $16K/year.
Self Employed 401K: Don't know much about this - I'm assuming it's the same as a tradition 401K you would get thru a huge employer?

1) Anyone have a recommendation on who to use (Fidelity, Vanduard, etc)?
2) If an employees has a Simple IRA and contributes $16K, are they able to contribute to a Roth IRA too?
3) Really would like a hands off approach, where the program can be setup and run with minimal involvement from the business.

Thank you!!
kgressler
Posts: 146
Joined: Wed Dec 16, 2015 2:58 pm
Location: St Louis MO

Re: Help - Small Business Retirment Plan Options

Post by kgressler »

ddurrett896 wrote: Wed May 15, 2024 6:26 am Have a small business with 10 employees that needs a retirement plan.

SEP IRA: Not a huge fan. As I understand, it's just a blank % of salary applied to all employees - and the % is the same across the board. Love the $69K max though.
Simple IRA: Allows employees to contribute with a matching portion. Only downside is that is caps at $16K/year.
Self Employed 401K: Don't know much about this - I'm assuming it's the same as a tradition 401K you would get thru a huge employer?

1) Anyone have a recommendation on who to use (Fidelity, Vanduard, etc)?
2) If an employees has a Simple IRA and contributes $16K, are they able to contribute to a Roth IRA too?
3) Really would like a hands off approach, where the program can be setup and run with minimal involvement from the business.

Thank you!!
I have a Simple IRA for the small business I own with Vanguard. Unfortunately Vanguard is no longer in the Simple IRA business and is selling them off to Ascensus. So Vanguard is off the table. So your other two best options in my opinion is Fidelity and Schwab. I am attempting to transfer my plan to Fidelity as I like their website and plan on using them as a one stop shop for all my banking.
As far as investing after the 16k in a Simple yes you can go the route of a Roth IRA as long as they are under the income thresholds.
As far as hands off I am not sure how hands off you can be. I have mine currently set up that when i complete my weekly payroll i log into Vanguard small business website and enter in the deposits for each employee along with the match. It takes maybe 60-90 seconds. I imagine Fidelity will be similar.
KneePartsPro
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Joined: Tue Dec 29, 2020 10:52 am

Re: Help - Small Business Retirment Plan Options

Post by KneePartsPro »

ddurrett896 wrote: Wed May 15, 2024 6:26 am Have a small business with 10 employees…

SEP IRA: Not a huge fan. As I understand, it's just a blank % of salary applied to all employees - and the % is the same across the board. Love the $69K max though.
“Employees” is the deal breaker. If those were 1099’s, there would be no “across the board” percentage. I agree that the full advantage of the SEP IRA may not be realize-able in your situation and yes, 69k max is a beautiful thing.
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illumination
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Re: Help - Small Business Retirment Plan Options

Post by illumination »

The Simple IRA is definitely easier to administer and cheaper if you just feel like you need to have something for the company. It just obligates the company to contribute very little. So most of it falls on the employee's shoulders and not the employer's. There's different ways it can be structured but it can be as little as like 2% of an employees salary.

I think it also depends on what type of business it is, if you have a lot of highly paid employees, to stay competitive with retaining and attracting people, you probably need a 401k plan. Less so if it's mostly employees with a lower salary. I personally wouldn't do an SEP-IRA unless you are wanting to give a generous, uniform percent to all your employees in order for you to reap the benefit. Could be very expensive for you to hit that max number.

I had a relative that owned a few retail type shops and they went with a Simple IRA (and very few participated, lots of turnover, and relatively low salaries). He just did not want the hassle and costs of administrating a 401k plan (and having the safe harbor provisions) even though he wanted one for himself. I probably would have done the same in that scenario, I think the costs to the business in order to get a larger personal retirement contribution would have outweighed the benefits.


If you have a one person business, I definitely recommend a Solo 401k.
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MP123
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Joined: Thu Feb 16, 2017 2:32 pm

Re: Help - Small Business Retirment Plan Options

Post by MP123 »

You might also consider a "Safe Harbor" or "Small Business" 401k.

By making a 3-4% contribution to your employees you'd automatically pass ADP and ACP non-discrimination testing which would allow you to defer your salary into the plan up to the limit with no issues.

A "Solo" 401k won't work, and a SEP-IRA has the issue you identified. A SIMPLE-IRA would be similar to a Safe Harbor 401k (required employer contributions, no testing) but have a lower limit for the deferrals and be easier to administer.

You can also consider eligibility requirements to participate in the plan, especially if you have high turnover employees. A SEP or 401k allows more restrictive requirements than a SIMPLE.
WeakOldGuy
Posts: 647
Joined: Mon Jan 01, 2024 10:42 pm

Re: Help - Small Business Retirment Plan Options

Post by WeakOldGuy »

When I was faced with this, I went with a full service company that setup a traditional 401k plan.

I am not recommending this but it is what I did. I know my profession (Healthcare) but claim ignorance in everything else. Running a practice and seeing patients was about all I could handle. So for me, it was a good move. Very easy on my part and it gave me access to a 401k (then later a Roth 401k option) for me and my staff. I really wanted my employees to take advantage of it.

I knew that I was not capable of handling the paperwork of managing the plan. The company that did sold out to Definiti. They are handling it now. They have been very helpful and have taken the load off me. They are expensive however and the investment options through Capital Group American Funds aren't ideal. However, it gave me a plan. It gave my employees a plan, and they kept me out of trouble with the regulatory bodies.

So I think having a plan for your employees is a good thing. I felt it was part of my responsibility as an employer and mentor figure for my employees. There are cheaper ways to do it than I did but it worked for me
On investing; I have lots of questions, many opinions, and little knowledge. A dangerous combination. Be warned.
djtx34
Posts: 21
Joined: Sun Jun 19, 2022 8:16 am

Re: Help - Small Business Retirment Plan Options

Post by djtx34 »

We first started with a SIMPLE IRA. Then moved to safe harbor 401k. We chose Guideline as provider. Integrated with our payroll provider. Very low fees and the Vanguard funds I wanted. Pretty happy and minimal mgmt.
cerequio
Posts: 76
Joined: Tue Feb 10, 2015 12:03 pm

Re: Help - Small Business Retirment Plan Options

Post by cerequio »

ddurrett896 wrote: Wed May 15, 2024 6:26 am Have a small business with 10 employees that needs a retirement plan.

SEP IRA: Not a huge fan. As I understand, it's just a blank % of salary applied to all employees - and the % is the same across the board. Love the $69K max though.
Simple IRA: Allows employees to contribute with a matching portion. Only downside is that is caps at $16K/year.
Self Employed 401K: Don't know much about this - I'm assuming it's the same as a tradition 401K you would get thru a huge employer?

1) Anyone have a recommendation on who to use (Fidelity, Vanduard, etc)?
2) If an employees has a Simple IRA and contributes $16K, are they able to contribute to a Roth IRA too?
3) Really would like a hands off approach, where the program can be setup and run with minimal involvement from the business.

Thank you!!
We have a similar sized business (10 employees) and went with BlueStar / Ameritas to administer our Safe Harbor 401k. Only 1-2 of our employees actually take advantage of it. Costs are about $1200/yr.
Topic Author
ddurrett896
Posts: 1721
Joined: Wed Nov 05, 2014 2:23 pm

Re: Help - Small Business Retirment Plan Options

Post by ddurrett896 »

Hey thinking about doing an HSA as well....

In the past, my HSA was thru a huge company and they made the pre tax deduction and funded. Fidelity confirmed I can setup a HSA on my own and fund, but does would taxable decrease if I make the trade (similar to funding a Roth)?

Thanks!
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