Who is it best for

Who contributes

2014

Limit

Advantage

Disadvantage

401K

The solo entrepreneur (solo 401K )and entrepreneur interested in preserving talents can use the safe harbor 401K

Employer and Employee

Employee $17,500

Employer: 100% of compensation

Employee + Employer contribution cannot exceed $52,000

Encourages high level of participation. Also, allows for high income deferral. Great way to build future income

Subject to discrimination rules

SIMPLE IRA

For the starting entrepreneur who likes planning

Employee salary reduction and employer

Employee: $12,000. Add $2,500 for over 50

Employer : can match 100% of the first 3% of compensation or 2% of each eligible employee contribution

Very little administrative work required.

Employer knows in advance what he is going to contribute

More highly paid employee cannot contribute as much as allowed in the 401K

SEP

Self-employed businesses with cyclical businesses and no employees

Employer only

Up to 25% of compensation but no more than $52,000

Contributions and costs are very flexible

Contributions must be made for part time and seasonal employees

Payroll Deduction IRA

An entrepreneur just starting out

Employee only

$5,500 over 50 add $1,000

The burden is pushed to the employer and the employer serves as an accountability partner to ensure the employee is contributing towards their future

The limits are the lowest of all employer retirement plans

Profit Sharing Plan

The entrepreneur who values their employees as assets rather than expenses and would love to keep them in the long run.

Employer makes contribution according to plan terms

Lesser of 100 % of compensation or $52,000

Great way to attract and retain talent

Must be offered to all employees at least 21 years old and worked 1,000 hours in the previous years. Therefore not only key talent benefits from this.