SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

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Clarice
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SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Thu Jun 14, 2018 3:35 pm

I've spent some time researching the classic SEP v. SIMPLE for a small business, owned by a married couple (Jim and Jill), with 1 non-owner employee.

The business is taxed as an S-corp or sole proprietorship. Therefore, the individual income tax rates for Jim and Jill are 32%.
The business currently uses a SIMPLE and is considering a switch to a SEP.
The current contribution to the SIMPLE is 3%, whereas the targeted contributed to the SEP would be 25%.
With the SEP, contributions have to be at the same percentage for all employees.
The non-owner employee's salary is $60k.

Therefore, if the switch is undertaken, then the non-owner employee's total pay goes from $60k + 3% to $60k + 25%. This is an increase of $13.2k, directly out of Jim and Jill's P&L.

However, now Jim and Jill have more tax-advantaged space in their SEPs than they did with their SIMPLEs.

Is the right way to think about this trade --> [X * 32% = $13.2k]? Solving for X = $41k. Meaning, if Jim and Jill can fit $41k into their SEPs then it's worth paying the non-employee more money?

Thank you very much for your help.
Last edited by Clarice on Wed Jun 20, 2018 5:50 pm, edited 3 times in total.

niceguy7376
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by niceguy7376 » Thu Jun 14, 2018 3:49 pm

Clarice wrote:
Thu Jun 14, 2018 3:35 pm

With salaries of $340k and SIMPLE contributions of 3%, that puts total contributions at $10.2k. With SIMPLE contributions of 25%, that puts total contributions at $85k.
You need to correct this statement. There should be one SEP mentioned instead of 2 SIMPLE

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Thu Jun 14, 2018 6:47 pm

niceguy7376 wrote:
Thu Jun 14, 2018 3:49 pm
Clarice wrote:
Thu Jun 14, 2018 3:35 pm

With salaries of $340k and SIMPLE contributions of 3%, that puts total contributions at $10.2k. With SIMPLE contributions of 25%, that puts total contributions at $85k.
You need to correct this statement. There should be one SEP mentioned instead of 2 SIMPLE
Thanks!

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Tue Jun 19, 2018 8:00 am

Has anyone here had to run the numbers for their SEP v SIMPLE decision?

niceguy7376
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by niceguy7376 » Wed Jun 20, 2018 3:23 pm

I will try to provide my experience with these two plans.

We had SEP one year for our S Corp with employees. We did the 25% of salary contributions to all employees (no limits of any participation on employees part).

Then we moved to SIMPLE IRA and we now contribute 3% to all employees that participate.

Our intent was that we are contributing to those that are participating.

In your case, you would pay the employee 13.2K more in benefits. How is your company setup?
Is the 25% tax rate coming as your individual tax bracket because it is a S Corp?

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Wed Jun 20, 2018 3:33 pm

niceguy7376 wrote:
Wed Jun 20, 2018 3:23 pm
I will try to provide my experience with these two plans.

We had SEP one year for our S Corp with employees. We did the 25% of salary contributions to all employees (no limits of any participation on employees part).

Then we moved to SIMPLE IRA and we now contribute 3% to all employees that participate.

Our intent was that we are contributing to those that are participating.

In your case, you would pay the employee 13.2K more in benefits. How is your company setup?
Is the 25% tax rate coming as your individual tax bracket because it is a S Corp?
Operating as an LLC. I put in 25% as "the business's tax rate" because I thought that would be the highest maximum tax rate for an LLC given TCJA, although I just realized that an LLC passes its income through to owners. Therefore that 25% should probably be around 32%, which would make the tax savings from a full-contribution to the non-owner employee even higher.

Please correct me if I'm mistaken in which tax rate to use... I'll edit the OP, too.

Note that I understand your point regarding only matching those who contribute, although in this case I'm focused quantitatively on the most tax-efficient decision.

niceguy7376
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by niceguy7376 » Wed Jun 20, 2018 3:55 pm

From a tax perspective, LLC is irrelevant.
If you are doing the Corp returns and then bringing the profit as income to your personal tax returns, then any profit after your income(340-60 = 280K) is being charged at the highest tax bracket that you fall under.

At those income levels, that would be 24% or 32% depending on all numbers.

With those incomes, you two are getting salary of 280K and SEP of 70k total for both of you.
Did you see how much it costs for a small business 401k plan?

I dont know if employer can pick a 25% contribution match for small business 401k plans. If that is allowed

You +spouse can contribute 18.5K as employee and (140K at 25%=) 35K each as employer contribution for max of 53.5K EACH or total of 107K for both.
This would be a lot more than a SEP plan.
For the third employee, 60K pay and 15k employer contribution(dont know if employee needs to contribute to get this match).

There are more experts in this forum on small business 401k plans (i only have a solo 401k and it would not apply in your case due to having an unrelated employee).

Spirit Rider
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Spirit Rider » Wed Jun 20, 2018 4:46 pm

As pointed out by niceguy7376, you need to clarify your tax status. An LLC is a state chartered business entity. It is not a tax status. I am going to assume for sake of discussion that you are a default single member LLC treated as a disregarded entity by the IRS and taxed as a sole proprietorship.
Clarice wrote:
Wed Jun 20, 2018 3:33 pm
Operating as an LLC. I put in 25% as "the business's tax rate" because I thought that would be the highest maximum tax rate for an LLC given TCJA, although I just realized that an LLC passes its income through to owners. Therefore that 25% should probably be around 32%, which would make the tax savings from a full-contribution to the non-owner employee even higher.

Please correct me if I'm mistaken in which tax rate to use... I'll edit the OP, too.
I think you are confusing "tax rate" with "contribution rate". The maximum employer SEP IRA contribution rate is 25% of compensation. For W-2 employees including S-Corp shareholder-employees,it is simply 25% of W-2 Box 1 wages. However, for a self-employed individual, the employer contribution itself is not compensation and thus reduces compensation. Therefore, a self-employed owner's maximum contribution is 20% of net self-employed earnings (business profit - 1/2 SE tax).

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Wed Jun 20, 2018 5:44 pm

Spirit Rider wrote:
Wed Jun 20, 2018 4:46 pm
As pointed out by niceguy7376, you need to clarify your tax status. An LLC is a state chartered business entity. It is not a tax status. I am going to assume for sake of discussion that you are a default single member LLC treated as a disregarded entity by the IRS and taxed as a sole proprietorship.
Clarice wrote:
Wed Jun 20, 2018 3:33 pm
Operating as an LLC. I put in 25% as "the business's tax rate" because I thought that would be the highest maximum tax rate for an LLC given TCJA, although I just realized that an LLC passes its income through to owners. Therefore that 25% should probably be around 32%, which would make the tax savings from a full-contribution to the non-owner employee even higher.

Please correct me if I'm mistaken in which tax rate to use... I'll edit the OP, too.
I think you are confusing "tax rate" with "contribution rate". The maximum employer SEP IRA contribution rate is 25% of compensation. For W-2 employees including S-Corp shareholder-employees,it is simply 25% of W-2 Box 1 wages. However, for a self-employed individual, the employer contribution itself is not compensation and thus reduces compensation. Therefore, a self-employed owner's maximum contribution is 20% of net self-employed earnings (business profit - 1/2 SE tax).
Thanks for your help, totally re-did OP. Sorry to lose the post's integrity like that but you've made me realize I was way off in my earlier ask...

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Wed Jun 20, 2018 5:44 pm

niceguy7376 wrote:
Wed Jun 20, 2018 3:55 pm
From a tax perspective, LLC is irrelevant.
If you are doing the Corp returns and then bringing the profit as income to your personal tax returns, then any profit after your income(340-60 = 280K) is being charged at the highest tax bracket that you fall under.

At those income levels, that would be 24% or 32% depending on all numbers.

With those incomes, you two are getting salary of 280K and SEP of 70k total for both of you.
Did you see how much it costs for a small business 401k plan?

I dont know if employer can pick a 25% contribution match for small business 401k plans. If that is allowed

You +spouse can contribute 18.5K as employee and (140K at 25%=) 35K each as employer contribution for max of 53.5K EACH or total of 107K for both.
This would be a lot more than a SEP plan.
For the third employee, 60K pay and 15k employer contribution(dont know if employee needs to contribute to get this match).

There are more experts in this forum on small business 401k plans (i only have a solo 401k and it would not apply in your case due to having an unrelated employee).
Thank you, niceguy. I've re-clarified my OP given your solid points.

nasrullah
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by nasrullah » Thu Jun 21, 2018 7:01 pm

I've meant to learn more about these for a while...

My question would be more along the lines:

Under what conditions would a SEP, SIMPLE or Small Plan 401k be ideal (assuming of course that for a single owner no common-law employees the Solo 401K is best)?

If you have a Solo 401K and end up hiring, what would make the most sense to switch to?
"We have a lot to do, and very little time, so we must work slowly." Liviu Ciulei | | Thanks vineviz (https://www.bogleheads.org/forum/memberlist.php?mode=viewprofile&u=134698) for the quote.

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Fri Jun 22, 2018 8:46 am

nasrullah wrote:
Thu Jun 21, 2018 7:01 pm
I've meant to learn more about these for a while...

My question would be more along the lines:

Under what conditions would a SEP, SIMPLE or Small Plan 401k be ideal (assuming of course that for a single owner no common-law employees the Solo 401K is best)?

If you have a Solo 401K and end up hiring, what would make the most sense to switch to?
I'm slowly convincing myself that if you can afford to pay your employee a little more (SEP), and you pay yourself a high salary, then that 25% SEP contribution goes a long way... Looking for some feedback though.

Think about it this way. With the SEP, if I have to pay $10k more each to my employee, but I'm able to get $40k more into my SEP then I've saved $10k in taxes today at a 25% tax rate. That's fully offsetting, but I still owe the taxes on the $40k later.

At some point though, that $40k tax-deferred growth will earn enough to offset the tax bill that I still owe...

Struggling hard with the math.

niceguy7376
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by niceguy7376 » Fri Jun 22, 2018 9:09 am

If employee is not interested in savings, then look into small business 401k so that you can save money on employer contributions if they are NOT contributing.

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Fri Jun 22, 2018 9:15 am

niceguy7376 wrote:
Fri Jun 22, 2018 9:09 am
If employee is not interested in savings, then look into small business 401k so that you can save money on employer contributions if they are NOT contributing.
Niceguy, I can't thank you enough.

My early research led me to believe my only options were the SEP or SIMPLE given I have a non-owner employee (disallowing the Solo 401k).
Early glance shows that a 401(k) safe-harbor plan has the same contribution maximum as a SEP, but only requiring a 3% non-matching contribution to the non-owner employees...

That's huge.

nasrullah
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by nasrullah » Fri Jun 22, 2018 10:26 am

I've had a Small Business 401k in the past. There's a lot to manage between fees, paperwork, and safe harbor contribution limits. The safe harbor was the biggest issue for us, getting a larger employer contribution than 100% on the first 3% was beyond annoying and required special compliance consideration.
"We have a lot to do, and very little time, so we must work slowly." Liviu Ciulei | | Thanks vineviz (https://www.bogleheads.org/forum/memberlist.php?mode=viewprofile&u=134698) for the quote.

niceguy7376
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by niceguy7376 » Fri Jun 22, 2018 11:03 am

If it were me in this situation(280k for both of us and 60k to employee), I will go with Small business 401k with higher employer contribution limit (same like SEP). The main difference is that SEP prevents backdoor roth while 401k allows back door roth.

solobuildingblogs
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by solobuildingblogs » Sat Jun 23, 2018 12:44 am

If you hav a old 401K (from a job, or I believe a schwab but not vanguard solo 401K allows as such) that allows incoming transfers from SEP IRA, you can still do a backdoor roth by doing such transfer to reduce you basis in IRAs to zero. For simple IRA you have to wait for two years before moving funds out or there's a penalty which is 20 or 25% IIRC.

gilgamesh
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by gilgamesh » Sat Jun 23, 2018 6:42 am

You are deferring taxes, not tax free. So, in retirement you will pay taxes on the $41k.

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Sat Jun 23, 2018 10:55 pm

gilgamesh wrote:
Sat Jun 23, 2018 6:42 am
You are deferring taxes, not tax free. So, in retirement you will pay taxes on the $41k.
Yes, but at some point that deferral’s earnings will offset the increased expenses.

gilgamesh
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by gilgamesh » Sun Jun 24, 2018 6:00 am

Clarice wrote:
Sat Jun 23, 2018 10:55 pm
gilgamesh wrote:
Sat Jun 23, 2018 6:42 am
You are deferring taxes, not tax free. So, in retirement you will pay taxes on the $41k.
Yes, but at some point that deferral’s earnings will offset the increased expenses.
What I would do is, see how SEP compares to simple + taxable. You’ve got to make some assumptions.

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Sun Jun 24, 2018 6:16 am

gilgamesh wrote:
Sun Jun 24, 2018 6:00 am
Clarice wrote:
Sat Jun 23, 2018 10:55 pm
gilgamesh wrote:
Sat Jun 23, 2018 6:42 am
You are deferring taxes, not tax free. So, in retirement you will pay taxes on the $41k.
Yes, but at some point that deferral’s earnings will offset the increased expenses.
What I would do is, see how SEP compares to simple + taxable. You’ve got to make some assumptions.
Yes. Understood. We are on the same page. I will try a spreadsheet.

gilgamesh
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by gilgamesh » Sun Jun 24, 2018 6:56 am

Clarice wrote:
Sun Jun 24, 2018 6:16 am
gilgamesh wrote:
Sun Jun 24, 2018 6:00 am
Clarice wrote:
Sat Jun 23, 2018 10:55 pm
gilgamesh wrote:
Sat Jun 23, 2018 6:42 am
You are deferring taxes, not tax free. So, in retirement you will pay taxes on the $41k.
Yes, but at some point that deferral’s earnings will offset the increased expenses.
What I would do is, see how SEP compares to simple + taxable. You’ve got to make some assumptions.
Yes. Understood. We are on the same page. I will try a spreadsheet.
Among many things to consider, keep in mind. Upon withdrawal taxable is taxed at capital gains rate and SEP at ordinary income rates. Also, taxable growth will have a tax drag - to account for this, I lower the expected annual return in taxable by 0.3% compared to retirement account.

With the new tax cuts, there’s another factor to consider - will it expire in 10 years? Then tax rates in retirement can be different from now.

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Sun Jun 24, 2018 7:48 am

gilgamesh wrote:
Sun Jun 24, 2018 6:56 am
Clarice wrote:
Sun Jun 24, 2018 6:16 am
gilgamesh wrote:
Sun Jun 24, 2018 6:00 am
Clarice wrote:
Sat Jun 23, 2018 10:55 pm
gilgamesh wrote:
Sat Jun 23, 2018 6:42 am
You are deferring taxes, not tax free. So, in retirement you will pay taxes on the $41k.
Yes, but at some point that deferral’s earnings will offset the increased expenses.
What I would do is, see how SEP compares to simple + taxable. You’ve got to make some assumptions.
Yes. Understood. We are on the same page. I will try a spreadsheet.
Among many things to consider, keep in mind. Upon withdrawal taxable is taxed at capital gains rate and SEP at ordinary income rates. Also, taxable growth will have a tax drag - to account for this, I lower the expected annual return in taxable by 0.3% compared to retirement account.

With the new tax cuts, there’s another factor to consider - will it expire in 10 years? Then tax rates in retirement can be different from now.
What’s your 0.3% adjustment, the unavoidable dividends or the not-often rebalancing or a combination? I ask because if no dividends are paid and rebalancing never occurs then the tax impact is only at withdrawal?

gilgamesh
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by gilgamesh » Sun Jun 24, 2018 11:20 am

Clarice wrote:
Sun Jun 24, 2018 7:48 am
gilgamesh wrote:
Sun Jun 24, 2018 6:56 am
Clarice wrote:
Sun Jun 24, 2018 6:16 am
gilgamesh wrote:
Sun Jun 24, 2018 6:00 am
Clarice wrote:
Sat Jun 23, 2018 10:55 pm


Yes, but at some point that deferral’s earnings will offset the increased expenses.
What I would do is, see how SEP compares to simple + taxable. You’ve got to make some assumptions.
Yes. Understood. We are on the same page. I will try a spreadsheet.
Among many things to consider, keep in mind. Upon withdrawal taxable is taxed at capital gains rate and SEP at ordinary income rates. Also, taxable growth will have a tax drag - to account for this, I lower the expected annual return in taxable by 0.3% compared to retirement account.

With the new tax cuts, there’s another factor to consider - will it expire in 10 years? Then tax rates in retirement can be different from now.
What’s your 0.3% adjustment, the unavoidable dividends or the not-often rebalancing or a combination? I ask because if no dividends are paid and rebalancing never occurs then the tax impact is only at withdrawal?
To account for tax free growth you get with any retirement accounts. Even the most efficient fund in a taxable account will have capital gains on many years, and this tax drag has to be accounted. Morningstar ‘after tax’ returns compared to returns can give you an idea of the correction needed.

P.S: Morningstar 10 yr return for VTSMX is 9.20%, tax adjusted return is 8.68%...that’s only a 0.052% tax drag/year I guess? Not too sure whether this is correct - ie., just divide the difference by 10.
Last edited by gilgamesh on Sun Jun 24, 2018 11:39 am, edited 4 times in total.

gilgamesh
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by gilgamesh » Sun Jun 24, 2018 11:28 am

A safe harbor 401k with either guideline.com or Employee Fiduciary doesn’t have much cost. If the single employee is already contributing 3%, then you can opt for 3% non-elective match. Yeah! You can also only do 3% match, but limit goes from 12.5K to 18.5k and if you are over 50, catch-up is 6k vs 3k.

So, if you and your wife are over 50, simple IRA contribution is a total of $31k, with safe harbor 401k it will be $49k...both has 3% match....something to consider.

gilgamesh
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by gilgamesh » Sun Jun 24, 2018 11:31 am

With taxable you will have $54.2k minus 32% to invest right? As compared to starting a SEP? Your $41k, plus $13.2k match you don’t have to make.

If you are planning to be in the 0% LTCG tax rate in retirement, the whole thing could get very interesting.

Spirit Rider
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Spirit Rider » Sun Jun 24, 2018 12:01 pm

gilgamesh wrote:
Sun Jun 24, 2018 11:28 am
A safe harbor 401k with either guideline.com or Employee Fiduciary doesn’t have much cost. If the single employee is already contributing 3%, then you can opt for 3% non-elective match. Yeah! You can also only do 3% match, but limit goes from 12.5K to 18.5k and if you are over 50, catch-up is 6k vs 3k.
The 3% 401K Safe Harbor employer contribution is non-elective, not a match. The safe harbor match is 100% of the first 3% of compensation and 50% of the next 2% of compensation for a total match of 4% of compensation.

If the OP's goal is to maximize the two spouses contribution. They could look into a safe harbor 401k + "New Comparability" Profit Sharing (PS) method. This allows the 401k plan to set up two employee groups. One for the two spouses and one for all other employees.

This method of PS allows different contribution percentages for the different groups. Usually a PS "safe harbor*" of 5% would allow a significantly higher PS contribution percentage for the spouses, *Not to be confused with the 401k safe harbor employer contribution. However, since this 5% PS contribution is >= 3% it meets the non-elective safe harbor requirement too.

This would require higher administrative costs, but would likely result in lower administrative + employer contribution cost than a SEP IRA.

gilgamesh
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by gilgamesh » Sun Jun 24, 2018 12:10 pm

I guess I used the wrong term. With safe harbor I could choose non-elective 3% ... this is identical in cost to my 3% simple IRA match. (Other than the cost of 401k, which is minimal with guideline.com and EF)

I don’t have to do a total 4% match with safe harbor, if I opted for the 3% non-elective, right?

Spirit Rider
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Spirit Rider » Sun Jun 24, 2018 3:22 pm

Correct. In both cases; SIMPLE IRA 3% -> 2% and safe harbor 401k 4% -> 3%, the non-elective contribution is 1% less than the maximum possible employer match.

Which costs the employer less depends on participant demographics. Studies have shown that in smaller plans < 2/3 of participants contribute enough to receive the full employer match.

It seems crazy that people don't take advantage of free money, but it happens more than you would think.

Clarice
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Clarice » Mon Jun 25, 2018 7:53 pm

Thank you both very much for your help. @gilgamesh, you are right about this getting interesting. @Spirit Rider, you make a solid recommendation that I haven't come across.

Below are my takeaways from the helpful dialogue.

SIMPLE IRA:
Max contribution of $15,500 per account; non-elective minimum contribution to employees = 2%.

SEP IRA:
Max contribution of $55,000 per account; must contribute equally to all employees up to 25%. Even though the employees are being paid more, this expense is tax-deductible, and may be offset by the fact that there's ~$40k more of tax-deferred growth than versus the SIMPLE. That ~$40k can be even higher if I choose to pay higher salaries to us as owners. We could each have an account, totalling to $110k in contributions.

Safe-harbor 401(k) + New Comparability Profit Sharing:
Max contribution of $55,000 per account; 5% contribution to employees likely to meet "safe harbor" requirement.

Of the three, I really need to explore the safe-harbor more. Looks like barely an incremental increase in cost for a considerable amount more of money put away pre-tax. Is this where a CFP/CPA come into play or do folks go it alone?

@Spirit Rider, no wonder people leave money on the table - it's easier to do figure out the SIMPLE than the alternatives...

jalbert
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by jalbert » Mon Jun 25, 2018 8:00 pm

If it is close but the SEP loses, you still may benefit from the SEP by being able to offer a nice extra benefit to the employee at a cost that is a fraction of the benefit value, with intangible benefits to you that may far exceed the incremental cost.

If you take that view, the calculation can be a little less precise.
Risk is not a guarantor of return.

Spirit Rider
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Re: SEP v SIMPLE - Higher Employee Cost but Offset by Tax Savings?

Post by Spirit Rider » Mon Jun 25, 2018 11:13 pm

A CFP/CPA is unlikely to know the particulars of New Comparability method of profit sharing. You will need a Third Party Administrator (TPA). This can be a Nationwide bundled TPA such as Employee Fiduciary or a local TPA.

Note: The potential exists to max out the annual addition limit (2018 = $55K). However, it will be dependent on your compensation levels, census of other participants and cross testing. The results of this may limit your contributions and/or require higher percentages for other groups.

You really can't determine whether it will be beneficial without investigation.

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