Comparison of Company Retirement Plans


IRA-Based Plans
Payroll Deduction IRA	Easy to set up and maintain.	Any employer with one or more employees.	Arrange for employees to make payroll deduction contributions. Transmit contributions for employees to IRA. No annual filing requirement for employer.	Employee contributions remitted through payroll deduction.	$5,500 for 2018. Participants age 50 or over can make additional contributions up to $1,000.	Employee can decide how much to contribute at any time.	There is no requirement. Can be made available to any employee.	Withdrawals permitted anytime subject to federal income taxes; early withdrawals subject to an additional tax (special rules apply to Roth IRAs). Participant loans are not permitted.	Contributions are immediately 100% vested.
SEP	Easy to set up and maintain.	Any employer with one or more employees.	May use IRS Form 5305-SEP to set up the plan. No annual filing requirement for employer.	Employer contributions only.	Up to 25% of compensation¹ but no more than $55,000 for 2018.	Employer can decide whether to make contributions year-to-year.	Must be offered to all employees who are at least 21 years old, employed by the employer for 3 of the last 5 years and had compensation of $600 for 2018.	Withdrawals permitted anytime subject to federal income taxes; early withdrawals subject to an additional tax. Participants cannot take loans from their SEP–IRAs.	Contributions are immediately 100% vested.
Simple IRA	Salary reduction plan with little administrative paperwork.	Any employer with 100 or fewer employees that not currently maintain another retirement plan.	May use IRS Form 5304-SIMPLE or 5305-SIMPLE to set up the plan. No annual filing requirement for employer. Bank or financial institution handles most of the paperwork.	Employee salary contributions and employer contributions.	Employee: $12,500 in 2018. Participants age 50 or over can make additional contributions up to $3,000 for 2018.Employer: Either match employee contributions 100% of first 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 can decide how much to contribute. Employer must make matching contributions or contribute 2% of each employee’s compensation.	Must be offered to all employees who have compensation of at least $5,000 in any prior 2 years, and are reasonably expected to earn at least $5,000 in the current year.	Withdrawals permitted anytime subject to federal income taxes; early withdrawals subject to an additional tax. Participants cannot take loans from their SIMPLE IRAs.	Contributions are immediately 100% vested.
Defined Contribution Plans
Profit Sharing	Permits employer to make large contributions for employees.	Any employer with one or more employees.	No model form to establish this plan. May need advice from a financial institution or employee benefit adviser. Must file annual Form 5500.	Annual employer contribution is discretionary.	The lesser of 25% of compensation¹ or $55,000 for 2018. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants.	Employer makes contribution as set by plan terms.	Generally, must be offered to all employees at least 21 years old who worked at least 1,000 hours in a previous year.	Withdrawals permitted after a specified event occurs (retirement, plan termination, etc.) subject to federal income taxes. Plan may permit loans and hardship withdrawals; early with drawals subject to an additional tax.	May vest over time according to plan terms.
Safe Harbor 401(k)	Permits high level of salary deferrals by employees without annual nondiscrimination testing.	Any employer with one or more employees.	No model form to establish this plan. May need advice from a financial institution or employee benefit adviser. A minimum amount of employer contributions is required. Must file annual Form 5500.	Employee salary reduction contributions and employer contributions.	Employee: $18,500 in 2018. Participants age 50 or over can make additional contributions up to $6,000 for 2018. Employer/Employee Combined: Up to the lesser of 100% of compensation¹ or $55,000 ($61,000 including catch-up contributions) for 2018. Employer can deduct (1) amounts that do not exceed 25% of aggregate compensation for all participants and (2) all salary reduction contributions.	Employee can decide how much to contribute based on a salary reduction agreement. The employer must make either specified matching contributions or a 3% contribution to all participants.	Generally, must be offered to all employees at least 21 years old who worked at least 1,000 hours in a previous year.	Withdrawals permitted after a specified event occurs (retirement, plan termination, etc.) subject to federal income taxes. Plan may permit loans and hardship withdrawals; early withdrawals subject to an additional tax.	Employee salary reduction contributions and all safe harbor employer contributions are immediately 100% vested. Some employer contributions may vest over time according to plan terms.
Automatic Enrollment 401(k)	Provides high level of participation and permits high level of salary deferrals by employees. Also safe harbor relief for default investments.	Any employer with one or more employees.	No model form to establish this plan. May need advice from a financial institution or employee benefit adviser. require annual nondiscrimination to ensure that plan does not discriminate in favor of highly compensated employees. Must file annual Form 5500.	Employee salary reduction contributions and employer contributions.	Employee: $18,500 in 2018. Participants age 50 or over can make additional contributions up to $6,000 for 2018. Employer/Employee Combined: Up to the lesser of 100% of compensation¹ or $55,000 ($61,000 including catch-up contributions) for 2018. Employer can deduct (1) amounts that do not exceed 25% of aggregate compensation for all participants and (2) all salary reduction contributions.	Employees, unless they opt otherwise, must make salary reduction contributions specified by the employer. The employer can make additional contributions, including matching contributions as set by plan terms.	Generally, must be offered to all employees at least 21 years old who worked at least 1,000 hours in a previous year.	Withdrawals permitted after a specified event occurs (retirement, plan termination, etc.) subject to federal income taxes. Plan may permit loans and hardship withdrawals; early withdrawals subject to an additional tax.	Employee salary reduction contributions are immediately 100% vested. Employer contributions may vest over time according to plan terms.
Traditional Enrollment 401(k)	Permits high level of salary deferrals by employees.	Any employer with one or more employees.	No model form to establish this plan. May need advice from a financial institution or employee benefit adviser. Requires annual nondiscrimination testing to ensure that plan does not discriminate in favor of highly compensated employees. Must file annual Form 5500.	Employee salary reduction contributions and employer contributions.	Employee: $18,500 in 2018. Participants age 50 or over can make additional contributions up to $6,000 for 2018. Employer/Employee Combined: Up to the lesser of 100% of compensation¹ or $55,000 ($61,000 including catch-up contributions) for 2018. Employer can deduct (1) amounts that do not exceed 25% of aggregate compensation for all participants and (2) all salary reduction contributions.	Employee can decide how much to contribute based on a salary reduction agreement. The employer can make additional contributions, including matching contributions as set by plan terms.	Generally, must be offered to all employees at least 21 years old who worked at least 1,000 hours in a previous year.	Withdrawals permitted after a specified event occurs (retirement, plan termination, etc.) subject to federal income taxes. Plan may permit loans and hardship withdrawals; early withdrawals subject to an additional tax.	Employee salary reduction contributions are immediately 100% vested. Employer contributions may vest over time according to plan terms.

Defined Benefit Plan	Provides a fixed, pre-established benefit for employees.	Any employer with one or more employees.	No model form to establish this plan. Advice from a financial institution or employee benefit adviser would be Must file annual Form 5500. An actuary must determine annual contributions.	Primarily funded by employer.	Annually determined contribution. Maximum annual benefit for the participant at retirement is 100% of the average highest compensation for 3 years or $220,000.	Employer generally to make contribution as set by plan terms.	Generally, must be offered to all employees at least 21 years old who worked at least 1,000 hours in a previous year.	Payment of benefits after a specified event occurs (retirement, plan termination, etc.). Plan may permit loans; early withdrawals subject to an additional tax.	May vest over time according to plan terms.
Source: irs.gov

IRA-Based Plans

Payroll Deduction IRA

Easy to set up and maintain.

Any employer with one or more employees.

Arrange for employees to make payroll deduction contributions. Transmit contributions for employees to IRA. No annual filing requirement for employer.

Employee contributions remitted through payroll deduction.

$5,500 for 2018. Participants age 50 or over can make additional contributions up to $1,000.

Employee can decide how much to contribute at any time.

There is no requirement. Can be made available to any employee.

Withdrawals permitted anytime subject to federal income taxes; early withdrawals subject to an additional tax (special rules apply to Roth IRAs). Participant loans are not permitted.

Contributions are immediately 100% vested.

SEP

Easy to set up and maintain.

Any employer with one or more employees.

May use IRS Form 5305-SEP to set up the plan. No annual filing requirement for employer.

Employer contributions only.

Up to 25% of compensation¹ but no more than $55,000 for 2018.

Employer can decide whether to make contributions year-to-year.

Must be offered to all employees who are at least 21 years old, employed by the employer for 3 of the last 5 years and had compensation of $600 for 2018.

Withdrawals permitted anytime subject to federal income taxes; early withdrawals subject to an additional tax. Participants cannot take loans from their SEP–IRAs.

Contributions are immediately 100% vested.

Simple IRA

Salary reduction plan with little administrative paperwork.

Any employer with 100 or fewer employees that not currently maintain another retirement plan.

May use IRS Form 5304-SIMPLE or 5305-SIMPLE to set up the plan. No annual filing requirement for employer. Bank or financial institution handles most of the paperwork.

Employee salary contributions and employer contributions.

Employee: $12,500 in 2018. Participants age 50 or over can make additional contributions up to $3,000 for 2018.Employer: Either match employee contributions 100% of first 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 can decide how much to contribute. Employer must make matching contributions or contribute 2% of each employee’s compensation.

Must be offered to all employees who have compensation of at least $5,000 in any prior 2 years, and are reasonably expected to earn at least $5,000 in the current year.

Withdrawals permitted anytime subject to federal income taxes; early withdrawals subject to an additional tax. Participants cannot take loans from their SIMPLE IRAs.

Contributions are immediately 100% vested.

Defined Contribution Plans

Profit Sharing

Permits employer to make large contributions for employees.

Any employer with one or more employees.

No model form to establish this plan. May need advice from a financial institution or employee benefit adviser. Must file annual Form 5500.

Annual employer contribution is discretionary.

The lesser of 25% of compensation¹ or $55,000 for 2018. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants.

Employer makes contribution as set by plan terms.

Generally, must be offered to all employees at least 21 years old who worked at least 1,000 hours in a previous year.

Withdrawals permitted after a specified event occurs (retirement, plan termination, etc.) subject to federal income taxes. Plan may permit loans and hardship withdrawals; early with drawals subject to an additional tax.

May vest over time according to plan terms.

Safe Harbor 401(k)

Permits high level of salary deferrals by employees without annual nondiscrimination testing.

Any employer with one or more employees.

No model form to establish this plan. May need advice from a financial institution or employee benefit adviser. A minimum amount of employer contributions is required. Must file annual Form 5500.

Employee salary reduction contributions and employer contributions.

Employee: $18,500 in 2018. Participants age 50 or over can make additional contributions up to $6,000 for 2018. Employer/Employee Combined: Up to the lesser of 100% of compensation¹ or $55,000 ($61,000 including catch-up contributions) for 2018. Employer can deduct (1) amounts that do not exceed 25% of aggregate compensation for all participants and (2) all salary reduction contributions.

Employee can decide how much to contribute based on a salary reduction agreement. The employer must make either specified matching contributions or a 3% contribution to all participants.

Generally, must be offered to all employees at least 21 years old who worked at least 1,000 hours in a previous year.

Employee salary reduction contributions and all safe harbor employer contributions are immediately 100% vested. Some employer contributions may vest over time according to plan terms.

Automatic Enrollment 401(k)

Provides high level of participation and permits high level of salary deferrals by employees. Also safe harbor relief for default investments.

Any employer with one or more employees.

No model form to establish this plan. May need advice from a financial institution or employee benefit adviser. require annual nondiscrimination to ensure that plan does not discriminate in favor of highly compensated employees. Must file annual Form 5500.

Employee salary reduction contributions and employer contributions.

Employees, unless they opt otherwise, must make salary reduction contributions specified by the employer. The employer can make additional contributions, including matching contributions as set by plan terms.

Generally, must be offered to all employees at least 21 years old who worked at least 1,000 hours in a previous year.

Employee salary reduction contributions are immediately 100% vested. Employer contributions may vest over time according to plan terms.

Traditional Enrollment 401(k)

Permits high level of salary deferrals by employees.

Any employer with one or more employees.

No model form to establish this plan. May need advice from a financial institution or employee benefit adviser. Requires annual nondiscrimination testing to ensure that plan does not discriminate in favor of highly compensated employees. Must file annual Form 5500.

Employee salary reduction contributions and employer contributions.

Employee can decide how much to contribute based on a salary reduction agreement. The employer can make additional contributions, including matching contributions as set by plan terms.

Generally, must be offered to all employees at least 21 years old who worked at least 1,000 hours in a previous year.

Employee salary reduction contributions are immediately 100% vested. Employer contributions may vest over time according to plan terms.

Defined Benefit Plan

Provides a fixed, pre-established benefit for employees.

Any employer with one or more employees.

No model form to establish this plan. Advice from a financial institution or employee benefit adviser would be Must file annual Form 5500. An actuary must determine annual contributions.

Primarily funded by employer.

Annually determined contribution. Maximum annual benefit for the participant at retirement is 100% of the average highest compensation for 3 years or $220,000.

Employer generally to make contribution as set by plan terms.

Generally, must be offered to all employees at least 21 years old who worked at least 1,000 hours in a previous year.

Payment of benefits after a specified event occurs (retirement, plan termination, etc.). Plan may permit loans; early withdrawals subject to an additional tax.

May vest over time according to plan terms.

Source: irs.gov