The SIMPLE is a calendar year plan set up for companies of 100 or fewer employees. The employees make contributions to the SIMPLE IRAs and the company matches.

Company Eligibility 

• May not have another retirement plan
• No more than 100 employees who earn at least $5,000 annually

Employee Eligibility 

• Received at least $5,000 during any preceding two years and reasonably expects to earn $5,000 this year
• Employer may make this less restrictive 

Employee Contributions 

• Up to $13,500 + $3,000 if 50 years or over for (2020)
• Contributions made monthly to IRA
• Tax deferred contribution—reduces employees W-2 income

Employer Match 

• 3% of participating employees (may lower to 1% in two out of five years) or
• 2% eligible employees (even those who do not participate)
• May be made one time at year end, tax due date plus extensions
  

The SEP is a retirement plan for small businesses that is employer funded. Contributions are made to IRAs of individual employees. May be used by sole proprietors, corporations, LLCs, LLPs, and partnerships. No restriction on number of employees. A SEP is a Traditional IRA and is subject to RMD.

Eligibility 

• Set by employer on 5305 SEP
• 21 years of age
• 3 years of service
• $650 per year minimum salary 

*May have at any age

The company or owner gets tax deduction.

Contribution 

• 0% - 25% of employee’s pay up to $57,000 (2020) / $58,000 (2021)
• Use $285,000 (2020) / $290,000 (2021) of income

*For self-employed use net income