Features \ Options |
Payroll Deduction IRA |
SEP-IRA |
SIMPLE-IRA |
Profit Sharing |
Key Advantage |
Easy to set up and maintain |
Easy to set up and maintain. |
Salary reduction plan with little administrative paperwork |
Permits employer to make large contributions for employees. |
|
Any business with one or more employees. |
Any business that does not currently maintain any other retirement plan. |
Any business with 100 or fewer employees that does not currently maintain any other retirement plan. |
Any business with one or more employees. |
Employer's Responsibilities
|
Set up arrangements for employees to make payroll deduction contributions. Transmit contributions for employees to funding vehicle. No employer tax filing required |
May set up plan by completing IRS Form 5305-SEP. No employer tax filing required. |
May set up by completing IRS Form 5304-SIMPLE or 5305-SIMPLE. No employer tax filing required. Bank or financial institution does most of the paperwork |
There is no model form to establish a plan. Advice from a financial institution or employee benefit advisor would be necessary. Annual filing of IRS Form 5500 is required. |
Funding Responsibility
|
Employee contributions remitted through payroll deduction. |
Employer contributions only. |
Employee salary reduction contributions and/or employer contributions. |
Employer contribution level can be determined year to year. |
Maximum Annual ContributionPer Participant |
$4,000 for 2007; $5,000 for 2008. Additional contributions can be made by participants age 50 or over. |
Up to 25% of compensation1 or a maximum of $45,000 for 2007. |
Employee: Up to $10,500 in 2007. Additional contributions can be made by participants age 50 or over. Employer: Either match employee contributions $ for $ up to 3% of compensation (can be reduced to as low as 1% in any 2 out of 5 yrs.) or contribute 2% of each eligible employee's compensation, up to $4,5002. |
Contributions per participant up to the lesser of 100% of compensation1 or $45,000 for 2007. Employer can deduct amounts that do not exceed 25% of aggregate compensation for all participants. |
Minimum Employee Coverage Requirements
|
Should be made available to all employees. |
Must be offered to all employees who are at least 21 years of age, employed by the business for 3 of last 5 years and earned at least $500 in a year for 2007. |
Must be offered to all employees who have earned at least $5,000 in previous 2 years, and are reasonably expected to earn at least $5,000 in the current year. |
Generally, must be offered to all employees at least 21 years of age who worked at least 1,000 hours in previous year. |
Withdrawals,Loans and Payments
|
Withdrawals at anytime ; subject to current federal income taxes and a possible 10% penalty if the participant is under age 59 1/2. |
Withdrawals at anytime; subject to current federal income taxes and a possible 10% penalty if the participant is under age 59 1/2. |
Withdrawals at any time subject to current federal income taxes. If employee is under age 59 1/2, may be subject to a 25% penalty if taken within the first 2 years of participation and a possible 10% penalty if taken afterwards. |
May permit loans and hardship withdrawals. Hardship withdrawals may be subject to a possible 10% penalty if participant is under age 59 1/2. Payment of benefits generally at retirement. |
Vesting
|
Immediate 100% |
Immediate 100% |
Employee salary reduction contributions and employer contributions vested 100% immediately. |
May vest over time according to plan terms. |
Contributor's
Options
|
Employee can decide how much to contribute at any time. |
Employer can decide whether or not to make contributions year to year. |
Employee can decide how much to contribute. Employer must make matching contributions or contribute 2% of each employee's salary up to the set maximum. |
Employer makes contribution as set by plan terms. |
Features \ Options |
Payroll Deduction IRA |
SEP-IRA |
SIMPLE-IRA |
Profit Sharing |