Offering a retirement plan is one of the most meaningful things a small business owner can do for employees and for themselves. It helps attract and retain talent, provides tax advantages, and gives you a structured way to build your own retirement savings alongside your team.
The challenge most owners face is knowing where to start. The options can feel overwhelming between SEP-IRA, SIMPLE IRA, Solo 401(k) and Group 401(k). And the differences between them aren’t always obvious.
Here’s a plain-English breakdown of the three most common plans for small businesses, and how to think about which one fits your situation.
SEP-IRA: Simple, Flexible, High Limits
A Simplified Employee Pension (SEP-IRA) is funded entirely by the employer. Employees don’t contribute. As the business owner, you can contribute up to 25% of each eligible employee’s compensation, with a 2026 maximum of $72,000 per person. Contributions are tax-deductible for the business and can vary from year to year, which makes the SEP-IRA especially attractive for businesses with fluctuating income.
Setup is minimal and the plan can be established as late as your tax filing deadline, including extensions, giving you flexibility to decide after the year is done. The main consideration is if you have employees, you must contribute the same percentage for all eligible staff as you contribute for yourself. That can make the SEP-IRA expensive if you have a large workforce.
SIMPLE IRA: Built for Small Teams
The SIMPLE IRA (Savings Incentive Match Plan for Employees) is designed for businesses with 100 or fewer employees and allows both employee and employer contributions. In 2026, employees can defer up to $17,000, with a $4,000 catch-up contribution for those 50 and older. Employees ages 60 through 63 qualify for an enhanced catch-up of $5,250 under SECURE 2.0 rules.
The employer contribution is not optional. You must either match employee contributions dollar-for-dollar up to 3% of compensation or make a flat 2% non-elective contribution for all eligible employees. The SIMPLE IRA is administratively straightforward. There’s no Form 5500 filing and no plan administrator required, making it a practical choice for small businesses that want a plan with employee participation but without the complexity of a full 401(k).
Group 401(k): The Most Comprehensive Option
A Group 401(k) is the most full-featured retirement plan available for small businesses with employees. It allows higher employee contribution limits ($24,500 in 2026, plus $8,000 catch-up for those 50 and older and $11,250 for ages 60 through 63) and gives employers considerable flexibility in designing matching and profit-sharing contributions.
The trade-off is administrative complexity. A 401(k) requires annual nondiscrimination testing, Form 5500 filing, and ongoing plan administration. Costs are higher than a SEP or SIMPLE IRA. But for growing businesses that want to offer a competitive benefits package, the 401(k) is often the right long-term answer and many providers now offer streamlined solutions that reduce the administrative burden.
What About State Retirement Mandates?
An increasing number of states now require employers above a certain size to offer retirement benefits or enroll employees in a state-sponsored plan. If your business is in California, Illinois, New York, Oregon, or several other states, it’s worth confirming whether a mandate applies and whether your current plan satisfies it.
Where to Start
The right plan depends on your business structure, the number and compensation of your employees, your budget for employer contributions, and how much administrative overhead you’re prepared to manage.
We can walk you through the options, help you understand the tax implications for your specific situation, and connect you with the right plan setup and administration resources.