Retirement Plan Options for Small Employers

By Kailee Hirschbock, CPA

Choosing a retirement plan is a strategic decision that extends beyond tax savings. For small employers, the right plan can support long-term growth, strengthen employee retention, and align ownership goals with the financial realities of the business.

Small employers generally have several viable options, ranging from low-administration arrangements to more complex qualified plans. The most appropriate choice depends on contribution goals, workforce composition, administrative capacity, and tolerance for fiduciary responsibility.

Side-by-Side Comparison of Retirement Plan Options

Plan Type	Who Contributes	2026 Contribution Limits	Administrative Complexity	Form 5500 / Audit	Best Suited For	Additional Considerations
Payroll Deduction IRA	Employee only	Up to $7,500 ($8,600 age 50+)	Very low	No / No	Employers seeking a simple entry point	No employer contributions; no employer tax deduction
SEP IRA	Employer only	Lesser of 25% of employee’s compensation or $72,000	Low	No / No	Sole proprietors / variable cash flow	Uniform contributions required; no employee deferrals
SIMPLE IRA	Employee & employer	Employee: $17,000 plus $4,000 catch-up for ages 50+ Employer: Must match 100% on employee deferrals up to 3% of compensation or 2% of compensation to all eligible employees	Low to moderate	No / No	Businesses with ≤100 employees	Employer contribution required; early withdrawal penalties
401(k) Plans	Employee & employer	Employee: $24,500 plus $8,000 catch-up for ages 50+ Employee & Employer: Combined contributions cannot exceed $72,000	Moderate to high	Yes / Yes if 100+ participant account balances	Growing businesses	Higher fiduciary responsibility; testing requirements
Defined Benefit Plan	Typically employer only	Actuarially determined; often $200K+	High	Yes / Often Yes	High-income owners	Required funding; actuarial valuation; investment risk

This chart provides a general overview only; unique plan provisions, special circumstances, and regulatory limitations may affect contribution limits. Employers should consult their advisors for guidance specific to their plan.

Payroll Deduction IRAs: A Starting Point

For employers seeking minimal administrative involvement, a Payroll Deduction IRA offers a simple starting point. This arrangement allows employees to contribute through payroll withholdings but does not constitute a formal employer-sponsored plan.

Simplified Employee Pensions (SEPs): Flexibility with Higher Limits

A SEP plan allows employer contributions with flexibility to adjust annually based on cash flow. Contributions must generally be uniform for all eligible employees.

SIMPLE IRAs: Shared Responsibility for Small Employers

SIMPLE IRAs allow employee deferrals with required employer contributions and are designed for businesses with 100 or fewer employees.

401(k) Plans: Greater Customization

401(k) plans provide higher contribution limits and design flexibility, but require more administration and fiduciary oversight.

Defined Benefit Plans: Maximizing Contributions for Owners

Defined benefit plans offer the highest contribution potential but require annual funding and actuarial oversight.

The Bottom Line

There is no single retirement plan that fits every employer. Evaluating trade-offs early can help avoid costly changes later and support long-term planning. Boyer & Ritter works with business owners to evaluate options and align plans with business and personal goals.

Kailee Hirschbock is a Manager in the Small Business and Employee Benefit Plan Services groups. She works with privately-held businesses to align retirement strategies with operational and financial goals. Contact Kailee at khirschbock@cpabr.com.