Values-Based Global Asset Managers Contact1-800-728-8762

Employer Plans

Picture Lake at Mt. Shuksan

Which plan is best for your company?

Small business owners have a number of retirement plan options to choose from. At Saturna, we believe SEP-IRA, SIMPLE-IRA, and 401(k) Plans offer employers great "Value for Your Money" because of their low cost and easy operation.

The plans have a few major distinctions:

The SEP-IRA is funded by employer contributions only, and is the simplest plan to implement. The business contributes the same percentage of compensation for all eligible employees.

The SIMPLE-IRA is funded by employee elective salary deferrals and flexible employer contributions. Employees have an opportunity to defer part of their salary to fund their retirement plans on a tax-advantaged basis.

401(k) Plans offer similar tax advantages on employee salary deferrals, but also offer enhanced administrative options, higher employee contribution limits, vesting schedule for optional employer contributions, available Roth contributions, plus more.

In determining which of these retirement plans is most appropriate for your business, you'll want to consider a few key questions, including:

  1. How much, if any, responsibility do you want the business to have for contributing to employee retirement plans?
  2. What percentage of compensation do you want employees to be able to contribute each year?
  3. Do you want to require the business to contribute to the plan on behalf of employees?
  4. Do you want employer contributions to be subject to a vesting schedule?

To help you compare the answers to these questions for all your plan options, we have developed the following chart. Review it to see which plan combines the features that may be most appropriate for your business.

Employer IRA vs. 401(k) Comparison

Eligible Employers Any self-employed individual, business owner, or individual who earns more than $600 self-employed income Businesses with 100 or fewer eligible employees and who do not currently maintain any other retirement plan Generally, any business may establish a 401(k)
Key Advantages Easy to set up and maintain; flexible annual funding requirements Salary deferral plan with less administration than a 401(k) Salary deferral plan with higher contribution limits; profit sharing, Roth accounts, loans and deferred vesting available
Funding Responsibility Employer contributions only Funded by salary deferral and employer contributions Funded by salary deferral and employer contributions, if elected under the plan; employer profit sharing
Contribution Flexibility Contributions are discretionary Employer contributions are mandatory Employer matching contributions, if elected under the plan, are mandatory; profit-sharing contributions are discretionary
Maximum Annual Contribution Per Employee Employer:
The lesser of $53,000 for 2015 or 25% of annual compensation (25% of self-employed income)
The lesser of $12,500 for 2015 or 100% of compensation (plus catch-ups)

Either match employee contributions dollar for dollar up to 3% of compensation (maximum $12,500 for the 2015 plan year); can be reduced to as low as 1% in any 2 out of 5 yrs
contribute 2% of each eligible employee’s compensation, up to $5,300 for 2015

The lesser of $18,000 for 2015 or 100% of compensation (plus catch-ups)

May be set by plan

Overall maximum contribution (from all sources) is 100% of compensation, not to exceed $53,000 for 2015 (plus catch-ups)

Catch-up Contributions None $3,000 for ages 50 and up $6,000 for ages 50 and up
Roth Accounts No No Yes
Vesting Contributions are immediately 100% vested Contributions are immediately 100% vested Employee salary-deferrals are immediately 100% vested

Employer contributions may be subject to a vesting schedule

Loans No No Yes
Age Restrictions May exclude employees under age 21 None May exclude employees under age 21
IRS Reporting By Employer None None Form 5500
Establishment Deadlines Employer's tax-filing deadline, including extensions Oct. 1 of the year in which the plan is being established The last day of the employer's plan year (usually calendar year)
Employer-paid Fees None None Annual fee of $750, plus 0.25% of year-end plan assets less 0.25% of affiliated fund assets

Check out the background of Saturna Brokerage Services, Inc. or any firm or investment professional on FINRA's BrokerCheck.