An easy retirement plan guide for small employers

Payroll Deduction IRA

• Can be set up by any employer
• Participant's retirement benefits based on participant’s account balance
• Employees may contribute to their own retirement by payroll deduction, up to $5,000¹ and an additional $1,000 if age 50 or older
• Can cover all employees or selected employees
• Easy to set up and operate
• No annual return required by the employer for the plan
• Annual nondiscrimination testing not required
• Little design flexibility
• Employees may not take loans from the plan
• Employees may withdraw their balance at any time, subject to tax
• Immediate vesting in full account balance

Simplified Employee Pension (SEP)

• Can be set up by any employer
• Participant's retirement benefits based on participant’s account balance
• Employer can decide each year whether and how much to contribute
• Only the employer is allowed to contribute to the plan on behalf of employees, up to the lesser of 25% of an employee’s compensation or $50,000¹
• Must cover all employees who are at least 21 years of age and have been employed in 3 of the last 5 years with compensation of at least $550¹
• Easy to set up and operate
• No annual return required
• Annual nondiscrimination testing not required
• Little design flexibility
• Employees may not take loans from the plan
• Employees may withdraw their balance at any time, subject to tax
• Immediate vesting in full account balance

SIMPLE IRA

• Can be set up by any employer with 100 or fewer employees and no other retirement plans
• Participant's retirement benefits based on participant’s account balance
• Allows employees to contribute to their own retirement through salary deferrals, up to $11,500¹ and an additional $2,500¹ if age 50 or older
• Employer is required to make annual minimum contributions
• Must cover all employees who have compensation of at least $5,000 in any 2 prior years and are expected to earn $5,000 in the current year
• Easy to set up and operate
• No annual return required
• Annual nondiscrimination testing not required
• Little design flexibility
• Employees may not take loans from the plan
• Employees may withdraw their balance at any time, subject to tax
• Immediate vesting in full account balance

¹Dollar Limits are for 2012 and are subject to cost-of-living adjustments for future years.