401k and Retirement Plan Options for Your Business in 2024: A Simple Guide to Choosing the Best Plan for Your Employees

Looking to start a retirement plan for your business in 2024? Check out this flow chart to guide you through which retirement plan type is best for you and your employees!

What Retirement Plan is Right for My Business

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This is a highly simplified overview. I highly recommend that we talk about what type of plan is right for you, your company, and your employees before starting a plan.

Most of the time one of these kinds of plans will suffice.

Defined Contribution Plans

401k Plans/Solo 401k for Self Employed

$23,000 normal contribution limit, additional $7,500 if over age 50

1. Employee contributions through salary deferral

2. Employer may match a portion of employee contributions

3. Individual investment options

4. Non-profits use 403b plans, governments and NGOs typically use 457b plans

401k Profit-Sharing Plans

$23,000 normal contribution limit, additional $7,500 if over age 50

1. Variation of the traditional 401k

2. Employers make discretionary contributions to employees' retirement accounts

3. Contributions often based on company profits

Simplified Employee Pension (SEP) IRA

Contribution limit is the lesser of $66,000 or 25% of compensation

1. Cheaper than a 401(k) to setup and administer

2. Geared towards small businesses and self-employed individuals

3. Employer makes contributions to individual retirement accounts for employees

Savings Incentive Match Plan for Employees (SIMPLE) IRA

$16,500 normal contribution limit, additional $3,500 if over age 50

1. Cheaper than a 401k to setup and administer

2. Designed for small businesses with fewer than 100 employees

3. Allows both employer and employee contributions

II. Defined Benefit Plans

Pension Plans/Solo Defined Benefit Plan for Self Employed

Contribution limit is lesser of $265,000 or 100% of average compensation over a consecutive three year period.

1. More expensive to set up and administer than other retirement plan types

2. Retirement plans that are provided by employers that pay a set amount at certain intervals after one retires

3. Benefits depend on salary history and years of service

Cash Balance Plans

Contribution limits can range from $50,000 to over $300,000 depending on age and compensation

1. More expensive to set up and administer than other retirement plan types

2. Plan that is a hybrid of defined benefit and defined contribution

3. Promises a predetermined pension, yet has an individual account balance

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