Features \ Options | Payroll Deduction IRA | SEP-IRA | SIMPLE-IRA | Safe Harbor 401(k) | Automatic Enrollment Enrollment 401(k) | 401(k) | Profit Sharing | Defined Benefit |
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Key Advantage | Easy to set up and maintain. | Easy to set up and maintain. | Salary reduction plan with little administrative paperwork. | Permits employee to contribute more than in other options without annual discrimination testing. | Provides high level of participation and permits high level of salary deferrals by employees. Also safe harbor relief for default investments. | Permits employee to contribute more than in other options. | Permits employer to make large contributions for employees. | Provides a fixed, pre-established benefit for employees. |
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Employers Who Can Provide This Option | Any business with one or more employees. | Any business that does not currently maintain any other retirement plan. | Any business with 100 or fewer employees that does not currently maintain any other retirement plan. | Any business with one or more employees. | Any business with one or more employees. | Any business with one or more employees. | Any business with one or more employees. | Any business with one or more employees. |
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Employer's Responsibilities Employer's Respon- sibilities | Set up arrangements for employees to make payroll deduction contributions. Transmit contributions for employees to funding vehicle. No employertax filing required. | May set up plan by completing IRS Form 5305-SEP. No employer tax filing required. | May set up by completing IRS Form 5304-SIMPLE or 5305-SIMPLE. No employer tax filing required. Bank or financial institution does most of the paperwork. | There is no model form to establish a plan. Advice from a financial institution or employee benefit advisor may be necessary.A minimum amount of employer contributions is required. Annual filing of IRS Form 5500 is required. | There is no model form to establish a plan. Advice from a financial institu-tion or employee benefit advisor may be necessary. Annual filing of IRS Form 5500 is required. | There is no model form to establish a plan. Advice from a financial institution or employee benefit advisor may be necessary. Annual filing of IRS Form 5500 required. Also requires annual non-discrimination testing to ensure plan does not discriminate in favor of highly compensated employees. | There is no model form to establish a plan. Advice from a financial institution or employee benefit advisor would be necessary. Annual filing of IRS Form 5500 is required. | There is no model form to establish a plan. Advice from a financial institution or employeebenefit advisor would be necessary. Annual filing of IRS Form 5500 is required. Actuary must determine funding obligations. |
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Funding Responsibility Funding Respon- sibility | Employee contributions remitted through payroll deduction. | Employer contributions only. | Employee salary reduction contributions and/or employer contributions. | Employee salary reduction contributions and employer contributions. | Employee salary reduction contributions and employer contributions. | Employee salary reduction contributions and/or employer contributions. | Employer contribution level can be determined year to year. | Primarily employer; may require or permit employee contributions. |
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Maximum Annual Contribution Contri- bution Per Participant | Up to $6,000 for 2022. Additional contributions can be made by participants age 50 or over up to $1,000 per year. | Up to 25% of compensation1 or a maximum of $61,000 in 2022. | Employee: Up to $14,000 in 2022. Additional contributions can be made by participants age 50 or over up to $3,000 in 2022. Employer: Either match employee contributions $ for $ up to 3% of compensation (can be reduced to as low as 1% in any 2 out of 5 yrs.) or contribute 2% of each eligible employee's compensation.2 | Employee: Up to $20,500 in 2022. Additional contributions can be made by participants age 50 or over up to $6,500 in 2022. Employer / Employee Combined: Contributions per participant up to the lesser of 100% of compensation1 or $61,000 in 2022. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants. | Employee: Up to $20,500 in 2022. Additional contributions can be made by participants age 50 or over up to $6,500 in 2022. Employer / Employee Combined: Contributions per participant up to the lesser of 100% of compensation1 or $61,000 in 2022. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants. | Employee: Up to $20,500 in 2022. Additional contributions can be made by participants age 50 or over up to $6,500 in 2022. Employer / Employee Combined: Contributions per participant up to the lesser of 100% of compensation1 or $61,000 in 2022. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants. | Contributions per participant up to the lesser of 100% of compensation1 or $61,000 in 2022. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants. | Per plan terms, employer may permit or require employee contribution. |
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Minimum Employee Coverage Requirements Require- ments | Should be made available to all employees. | Must be offered to all employees who are at least 21 years of age, employed by the business for 3 of last 5 years and earned at least $600 in a year for 2022. | Must be offered to all employees who have earned at least $5,000 in previous 2 years, and are reasonably expected to earn at least $5,000 in the current year. | Generally, must be offered to all employees at least 21 years of age who worked at least 1,000 hours in previous year. | Generally, must include all employees who have not already opted out and those who are at least 21 years of age who worked at least 1,000 hours in previous year. | Generally, must be offered to all employees at least 21 years of age who worked at least 1,000 hours in previous year. | Generally, must be offered to all employees at least 21 years of age who worked at least 1,000 hours in previous year. | Mustbe offered to all employees at least 21 years of age who worked at least 1,000 hours inprevious year. |
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Withdrawals, Withdraw- als, Loans and Payments | Withdrawals at anytime ; subject to current federal income taxes and a possible 10% penalty if the participant is under age 59 1/2. | Withdrawals at anytime; subject to current federal income taxes and a possible 10% penalty if the participant is under age 59 1/2. | Withdrawals at any time subject to current federal income taxes. If employee is under age 59 1/2, may be subject to a 25% penalty if taken within the first 2 years of participation and a possible 10% penalty if taken afterwards. | Cannot take withdrawals until a specified event, such as reaching 59 1/2, death, separation from service or other event as identified in plan. May permit loans and hardship withdrawals. Withdrawals may be subject to a possible 10% penalty if participant is under age 59 1/2. | Cannot take withdrawals until a specified event, such as reaching 59 1/2, death, separation from service or other event as identified in plan. May permit loans and hardship withdrawals. Withdrawals may be subject to a possible 10% penalty if participant is under age 59 1/2. | Cannot take withdrawals until a specified event, such as reaching 59 1/2, death, separation from service or other event as identified in plan. May permit loans and hardship withdrawals. Withdrawals may be subject to a possible 10% penalty if participant is under age 59 1/2. | May permit loans and hardship withdrawals. Hardship withdrawals may be subject to a possible 10% penalty if participant is under age 59 1/2. Payment of benefits generally at retirement. | Paymentof benefits generally at retirement, may offer participant loans. |
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Vesting | Immediate 100% | Immediate 100% | Employee salary reduction contributions and employer contributions vested 100% immediately. | Employee salary reduction contributions and most employer contributions vest immediately. Some employer contributions may vest over time according to plan terms. | Employee salary reduction contributions vest immediately. Employer contributions may vest over time according to plan terms. | Employee salary reduction contributions vest immediately. Employer contributions may vest over time according to plan terms. | May vest over time according to plan terms. | Mayvest over time according to plan terms. |
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Contributor's Contrib- utor's Options | Employee can decide how much to contribute at any time. | Employer can decide whether or not to make contributions year to year. | Employee can decide how much to contribute. Employer must make matching contributions or contribute 2% of each employee's salary up to the set maximum. | Employees can decide how much to contribute pursuant to a salary reduction agreement. The employer must make either specified matching contributions or a 3% contribution to all participants. | Employees, unless they opt otherwise, must make salary reduction contributions specified by the employer. The employer can make additional matching contributions as set by plan terms. | Employees can decide how much to contribute pursuant to a salary reduction agreement. The employer can make additional contribution, including matching contributions as set by plan terms. | Employer makes contribution as set by plan terms. | Employermakes contributions as set by plan terms. |
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Features \ Options | Payroll Deduction IRA | SEP-IRA | SIMPLE-IRA | Safe Harbor 401(k) | Automatic Enrollment Enrollment 401(k) | 401(k) | Profit Sharing | Defined Benefit |
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