b'The flexibility to skip employer contributions in some years? A plan with lowest costs? Easiest administration? Retirement Plans for Small BusinessesThe answers to these questions can help guide you and your retirement professional to the plan (or combination of plans) most appropriate for you.SEPs A SEP allows you to set up an IRA (a "SEP-IRA") Tracy L. Edwards, CFPfor yourself and each of your eligible employees. Financial AdvisorYou contribute a uniform percentage of pay for each If you are self-employed or own a small business andemployee, although you don\'t have to make you haven\'t established a retirement savings plan,contributions every year, offering you some what are you waiting for? A retirement plan can helpflexibility when business conditions vary. For 2023, you and your employees save for the future.your contributions for each employee are limited to the lesser of 25% of pay or $66,000 (up from Tax advantages$61,000 in 2022). Most employers, including those A retirement plan can have significant tax advantages:who are self-employed, can establish a SEP.Your contributions are deductible when madeSEPs have low start-up and operating costs and can Your contributions aren\'t taxed to an employeebe established using an easy two-page form. The until distributed from the planplan must cover any employee aged 21 or older who Money in the retirement program grows taxhas worked for you for three of the last five years deferred (or, in the case of Roth accounts,and who earns $750 or more. potentially tax free) SIMPLE IRA plan Types of plansThe SIMPLE IRA plan is available if you have 100 Retirement plans are usually either IRA-based (likeor fewer employees. Employees can elect to make SEPs and SIMPLE IRAs) or "qualified" [like 401(k)s,pre-tax contributions in 2023 of up to $15,500 profit-sharing plans, and defined benefit plans].($19,000 if age 50 or older; up from $14,000 and Qualified plans are generally more complicated and$17,000, respectively, in 2022). You must either expensive to maintain than IRA-based plans becausematch your employees\' contributions dollar for dollar they have to comply with specific Internal Revenueup to 3% of each employee\'s compensationor Code and ERISA (the Employee Retirement Incomemake a fixed contribution of 2% of compensation for Security Act of 1974) requirements in order to qualifyeach eligible employee. (The 3% match can be for their tax benefits. Also, qualified plan assets mustreduced to 1% in any two of five years.) Each be held either in trust or by an insurance company.employee who earned $5,000 or more in any two With IRA-based plans, your employees own (i.e.,prior years, and who is expected to earn at least "vest" in) your contributions immediately. With$5,000 in the current year, must be allowed to qualified plans, you can generally require that yourparticipate in the plan. employees work a certain numbers of years before they vest.SIMPLE IRA plans are easy to set up. You fill out a short form to establish a plan and ensure that Which plan is right for you?SIMPLE IRAs are set up for each employee. A With so many retirement plans to choose from, eachfinancial institution can do much of the paperwork. with unique advantages and disadvantages, you\'llAdditionally, administrative costs are low. need to clearly define your goals before attempting to choose a plan. For example, do you want:Profit-sharing plan To maximize the amount you can save for yourTypically, only you, not your employees, contribute own retirement?to a qualified profit-sharing plan. Your contributions A plan funded by employer contributions? Byare discretionarythere\'s usually no set amount employee contributions? Both?you need to contribute each year, and you have the A plan that allows you and your employees toflexibility to contribute nothing at all in a given year make pre-tax and/or Roth contributions?if you so choose (although your contributions must be nondiscriminatory, and "substantial and (continued to page 5) 4'