Small employer plans like a SEP or a SIMPLE-IRA are great opportunities for small businesses to save for retirement because of the no administration costs. However, like clothing for kids, there will be a time when these plans no longer fit.<\/p>\n
When do they no longer fit? When you start adding employees that aren\u2019t owners or related to owners these plans allow no disparity in employer contributions. So if you want a 15% employer contribution, you have to give it to the employees who have been there for a year full-time. There is also no salary deferral component in a SEP and a limited one for SIMPLEs, so the bulk of the retirement plan contributions are what you\u2019re going to fund.<\/p>\n
So that\u2019s why you need to look into something that\u2019s a better fit like a 401(k) plan or one that\u2019s in conjunction with a cash balance plan. So you need to know when the SEP no longer fits.<\/p>\n
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