Small-business plans—easy, low-cost ways to save for retirement

Find out which retirement plan is right for you and your employees

Here's a quick and easy guide to determining which is the best fit for your business and employees. It includes basic facts about different types of plans, with features and benefits of plans administered by Vanguard.

SEP-IRA

SIMPLE IRA

Vanguard Individual 401(k)

Small Plan 401(k)
(Vanguard Retirement Plan Access™ )

Key advantages
  • Works well for business owners who prefer to provide a retirement benefit to all employees (including themselves) by making employer contributions.
  • Great starter plan that encourages contributions from employees.
  • Excellent method to maximize tax deferral. Can contribute as employer and employee.
  • Vanguard is one of the few investment companies to offer a Roth 401(k) option.
  • Great option if you're looking to offer your employees all the tax, savings, and retirement benefits of a typical 401(k).

 

Employers who can provide this option
  • Any business that doesn't currently maintain any other retirement plan.
  • Any business with  100 or fewer employees that doesn't currently maintain any other retirement plan.
  • Any business with one employee or more.
Employee eligibility and minimum coverage requirements
  • Generally, employees must be allowed to participate if they're 21 or older, earn at least $550 annually in 2014 or $600 in 2015, and have worked for the same employer in at least three of the past five years.
  • No age restrictions. Employees must earn a minimum amount specified by the employer during any two preceding years, and expect to earn at least $5,000 in the current year.
  • No common-law employees. Otherwise, no age or service restrictions.
  • Based on employer plan rules. Generally must be offered to all employees at least 21 years of age who worked at least 1,000 hours in the previous year.
Funding responsibility
  • Generally, employer contributions only. Vanguard allows employers to use their SEP-IRA account to make their personal IRA contributions as well—up to the annual IRS limit.
  • Employee salary reduction contributions and/or employer contributions.
  • Business owners can contribute as employer and/or employee.
  • Employee salary reduction contributions and/or employer contributions.
Contribution options
  • Employer can decide whether or not to make contributions from year to year.
  • Employee can decide how much to contribute. Employer must make matching contributions, or must contribute 2% of each employee's salary up to the set maximum.
  • Business owner can contribute as employer and/or employee.
  • Employee can decide how much to contribute. Employer can make additional contributions, including matching contributions, as set by plan terms.

Employer contribution limits

  • For the 2014 tax year, up to 25% of the participant's compensation or a maximum of $52,000, whichever is less.
  • For the 2015 tax year, up to 25% of the participant's compensation or a maximum of $53,000, whichever is less.
  • Contributions are deductible as a business expense and aren't required every year.
  • Option 1: Match up to 3% of each eligible employee's compensation (which can be reduced to as low as 1% in any two out of five years). The amount, however, can't exceed $12,000 in the 2014 tax year or $12,500 in the 2015 tax year.
  • Option 2: Contribute 2% of each eligible employee's compensation. The amount, however, can't exceed $5,200 in the 2014 tax year or $5,300 in the 2015 tax year.
  • Contributions are deductible as a business expense and aren't required every year.
  • For the 2014 tax year, overall employer plus employee contribution limit is 100% of compensation with a maximum of $52,000 ($57,500 if individual is age 50 or older).
  • For the 2015 tax year, overall employer plus employee contribution limit is 100% of compensation with a maximum of $53,000 ($59,000 if the employee is age 50 or older).
  • Maximum tax deductible employer contribution is 25% of compensation.
  • Contributions are deductible as a business expense and aren't required every year.
  • For the 2014 tax year, overall employer plus employee contribution limit is 100% of compensation with a maximum of $52,000 ($57,500, if the individual is age 50 or older).
  • For the 2015 tax year, overall employer plus employee contribution limit is 100% of compensation with a maximum of $53,000 ($59,000 if the employee is age 50 or older).
  • Maximum tax deductible employer contribution is 25% of compensation.
  • Contributions are deductible as a business expense and aren't required every year.

Employee contribution limits

  • Up to $5,500 for the 2014 and 2015 tax years($6,500 for employees age 50 or older).
  • This is the total amount the employee can personally contribute to all SEP-, Roth, and traditional IRAs each year.
  • $12,000 for the 2014 tax year ($14,500 for employees age 50 or older).
  • $12,500 for the 2015 tax year ($15,500 for employees age 50 or older).
  • Employees aren't required to contribute in any given year.
  • $17,500 for the 2014 tax year ($23,000 for employees age 50 or older).
  • $18,000 for the 2015 tax year ($24,000 for employees age 50 or older).
  • Can't exceed 100% of compensation.
  • $17,500 for the 2014 tax year ($23,000 for employees age 50 or older).
  • $18,000 for the 2015 tax year ($24,000 for employees age 50 or older).
  • Can't exceed 100% of compensation.
Investment choices
  • Vanguard mutual funds, plus ETFs and individual securities through Vanguard Brokerage Services®.
  • Vanguard mutual funds.
  • Vanguard mutual funds.
  • Vanguard mutual funds.
  • Approximately 10,000 non-Vanguard funds.*
  • Company stock and self-directed brokerage accounts.
Withdrawals, loans, and payments
  • An employee may initiate a withdrawal at any time, subject to current federal income taxes and a possible 10% penalty if the participant is under age 59½.
  • An employee may initiate a withdrawal at any time, subject to current federal income taxes. If under age 59½, employee may be subject to a 25% penalty if it's taken within the first two years of participation, and a possible 10% penalty if it's taken after the first two years.
  • Can't take withdrawals until a specified event such as reaching age 59½, death, separation from service, or other event as identified in the plan document.
  • May permit hardship withdrawals, which may be subject to a 10% penalty if the participant's under age 59½.
  • Vanguard's Individual 401(k) program doesn't offer loans.
  • Can't take withdrawals until a specified event such as reaching age 59½, death, separation from service, or other event as identified in the plan document.
  • May permit loans and hardship withdrawals, which may be subject to a 10% penalty if the participant's under age 59½.
Employer's responsibilities
  • May set up plan by completing Form 5305-SEP.
  • No IRS reporting required.
  • May set up plan by completing Form 5304-SIMPLE or 5305-SIMPLE.
  • No employer IRS reporting required.
  • Bank or financial institution does most of the paperwork.
  • Our program includes a prototype plan document and adoption agreement for employers to use to set up their plans.
  • Annual filing of Form 5500 may be required.
  • Plan sponsors have various administrative and fiduciary responsibilities.
  • Plan sponsors have various administrative and fiduciary responsibilities.
  • Vanguard Retirement Plan Access provides day-to-day plan sponsor support, recordkeeping, and compliance services such as real-time compliance testing and Form 5500 preparation.

Call Vanguard at 800-662-2003 for more information.
For information about Vanguard Retirement Plan Access, please call 888-684-401K.

An employee other than an owner, a business partner, or a shareholder of a corporation and their respective spouses. (Independent contractors are not employees.)

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