7 Retirement Accounts For Small Business Owners To Consider

Owning a small business comes with myriad responsibilities—among the most critical is securing a retirement strategy that benefits both you and your team. A well-structured plan not only lowers taxable income but also fosters loyalty among employees and ensures a smooth succession when you step away from daily operations.

Yet selecting and implementing the right retirement account can feel overwhelming. From navigating IRS contribution limits to managing ERISA compliance and handling annual filings, plan sponsors often face steep administrative demands and tough choices.

This guide highlights seven retirement accounts for small business owners—ranging from flexible SEP IRAs and high-saving Solo 401(k)s to SIMPLE IRAs, traditional 401(k)s, profit-sharing plans, cash balance pensions, and individual IRAs. You’ll discover the unique advantages and potential trade-offs of each option.

In the sections that follow, we’ll offer a decision-making framework for choosing the ideal plan, walk through setup steps, and clarify ongoing compliance and fiduciary responsibilities. Let’s build a retirement program that meets your financial goals and supports your workforce.

1. SEP IRA (Simplified Employee Pension Individual Retirement Account)

A Simplified Employee Pension (SEP IRA) offers small businesses a straightforward, low-cost approach to retirement savings. Unlike more complex plans, a SEP IRA places the funding responsibility squarely on the employer and sidesteps many of the annual compliance requirements under ERISA. This flexibility makes it an attractive option for solo entrepreneurs or companies with just a handful of staff—whether profits surge or dip, you decide if and how much to contribute each year.

What Is a SEP IRA?

A SEP IRA works similarly to a traditional IRA in that investments grow tax-deferred and distributions in retirement are taxed as ordinary income. The critical distinction is that only the employer contributes—employees do not defer any part of their salary. Employers establish and fund a SEP IRA for each eligible employee, and account ownership rests with the individual.

Contribution Limits and Flexibility

For 2025, employer contributions can be up to the lesser of:

• 25% of an eligible employee’s compensation, or
• $70,000, based on a maximum compensation cap of $350,000.

Contributions are entirely discretionary, so you can skip funding in lean years or ramp up contributions when cash flow allows. For full details, refer to the IRS guidance on SEP contribution limits.

Tax Advantages

Employer contributions to a SEP IRA are fully tax-deductible, lowering your taxable income in the year you make them. Meanwhile, investment earnings grow tax-deferred until withdrawals begin—typically after age 59½—allowing you and your employees to benefit from compounding without annual tax drag.

Pros and Cons

Pros:

• High contribution limits compared to traditional IRAs
• Minimal administrative burden and no annual IRS filings
• Flexible, year-to-year contribution decisions

Cons:

• Mandatory equal percentage contributions for all eligible employees
• No option for employee salary deferrals

Ideal Use Cases

A SEP IRA is particularly well-suited for:

• Solo entrepreneurs or micro-businesses with few or no employees
• Owners who want the ability to make large, discretionary contributions in profitable years
• Companies seeking a retirement plan with minimal setup and ongoing paperwork

2. Solo 401(k)

When you’re a business owner without full-time staff—apart from a spouse—a Solo 401(k) can turbocharge your savings. Also known as a one-participant 401(k), this plan lets you wear two hats: employee and employer. That dual status unlocks higher overall contribution potential, giving you more tax-advantaged room to save when margins are healthy.

Overview and Key Features

A Solo 401(k) functions much like a traditional employer-sponsored plan but is tailored for a single employee (you) plus an optional spouse. You defer part of your compensation as the “employee,” up to the annual limit, then top it off with a profit-sharing contribution as the “employer.” Account ownership remains with you, and you decide on the investments, subject to plan rules.

Contribution Limits and Catch-Up Options

For 2025, the Solo 401(k) lets you set aside up to $23,000 of your salary through elective deferrals. If you’re age 50 or older, you can tack on a $7,500 catch-up contribution. On top of that, as the employer, you can contribute up to 25% of your compensation, as defined by the plan, for a combined cap of $70,000. Thanks to SECURE 2.0, participants aged 60 to 63 qualify for an even larger catch-up over that $7,500 standard, further boosting late-career savings.

Traditional vs. Roth Options

One of the Solo 401(k)’s highlights is the flexibility to choose between pre-tax (traditional) and after-tax (Roth) contributions. With a traditional Solo 401(k), your deferrals reduce taxable income today, and distributions in retirement are taxed as ordinary income. A Solo Roth 401(k), by contrast, offers no upfront deduction—but qualified withdrawals in retirement come out tax-free. If you expect to be in a higher tax bracket later, making Roth contributions in lean years could pay dividends down the road.

Pros and Cons

Pros:

• Highest total contribution ceiling among small-business plans
• Dual employee and employer roles maximize tax-advantaged savings
• Option for Roth contributions to build tax-free income

Cons:

• Plan is limited to you and your spouse—hiring employees disqualifies you
• Annual IRS filings (Form 5500) required once assets exceed $250,000
• Slightly more administrative work than a SEP IRA or SIMPLE IRA

Ideal Business Profiles

A Solo 401(k) is a strong choice for:

• High-earning self-employed professionals, consultants, and freelancers
• Owner-only LLCs or sole proprietorships seeking maximum retirement deferral
• Businesses with fluctuating profits that want to accelerate savings in good years and scale back when cash flow is tighter

3. SIMPLE IRA (Savings Incentive Match Plan for Employees)

A SIMPLE IRA is perfect for small businesses that want a low-hassle retirement plan combining employee ownership and employer support. With minimal paperwork and no ERISA nondiscrimination testing, it strikes a balance between encouraging staff participation and keeping administrative tasks manageable. Both eligible employees and the company contribute, which can help foster loyalty and reduce turnover.

Overview and Eligibility

A Savings Incentive Match Plan for Employees (SIMPLE) IRA lets employees defer part of their pay into their own IRA accounts, while the employer either matches contributions or makes a flat nonelective contribution. To be eligible, your business must have 100 or fewer employees who each earned at least $5,000 in the prior year. Because each participant holds their account, you avoid the complexity—and cost—of annual nondiscrimination testing under ERISA.

Contribution Limits and Catch-Up

For 2025, employees may defer up to $16,500 of their salary into a SIMPLE IRA. Those age 50 and older can make an extra $3,500 catch-up contribution. Some plans allow higher limits—$17,600 and a $3,850 catch-up—and SECURE 2.0 raises the catch-up to $5,250 for participants aged 60–63. Employee deferrals must hit participant accounts by each payroll date, and employer contributions (match or nonelective) are due by the company’s tax-filing deadline, including extensions.

Employer Contribution Requirements

As the plan sponsor, you select one of two contribution methods:

• 3% Match (Option A): Dollar-for-dollar match on employee deferrals, up to 3% of compensation.
• 2% Nonelective (Option B): A fixed 2% contribution on behalf of all eligible employees, whether they defer or not.
  This choice lets you tailor your cash flow: incentivize deferrals with a match or simplify budgeting with a flat rate.

Pros and Cons

Pros:

• Fast, low-cost setup and minimal ongoing administration
• Ownership of accounts by employees, boosting transparency and engagement
• No annual ERISA nondiscrimination or coverage testing

Cons:

• Lower contribution limits compared with SEP IRAs and Solo 401(k)s
• Required employer contributions even in lean years
• Not suitable for owners seeking very high discretionary savings

Best Fit Scenarios

Opt for a SIMPLE IRA if you run a midsize small business—say, 10 to 50 employees—and want an easy-to-administer plan that encourages staff saving. It’s especially attractive when predictability and simplicity top your list of priorities, and when you’d rather avoid the complexity and cost of a traditional 401(k).

For a comprehensive breakdown of contribution rules, catch-up options and setup steps, see this SIMPLE IRA guide.

4. Traditional 401(k

A Traditional 401(k) is the tried-and-true, employer-sponsored retirement plan that many employees expect and appreciate. Unlike a Solo 401(k), which is designed for one-participant businesses, this plan accommodates any number of staff, making it a go-to benefit for companies that want to attract and retain talent. It blends pre-tax salary deferrals with optional employer matching, all within the framework of ERISA’s nondiscrimination and reporting requirements.

Overview and Employer-Sponsored Nature

A Traditional 401(k) is set up and maintained by the employer, who selects the plan provider, investment lineup and match formula. Employees opt to contribute a portion of their salary on a pre-tax basis, reducing their taxable income today. Employers can choose to match those deferrals—fully or partially—up to a specified percentage of pay. Because accounts are held individually, each participant owns their investments, but the company remains responsible for ensuring the plan operates in compliance with ERISA.

Contribution and Matching Limits

For 2025, participants in a Traditional 401(k) may defer up to $23,000 of their salary on a pre-tax basis. Employees aged 50 and older can make an additional catch-up contribution of $7,500. On top of that, employers can contribute matching funds or profit-sharing allocations, as long as the combined total of employee and employer contributions does not exceed $69,000 per participant (or $76,500 for those eligible for catch-up). Matching formulas often look like 50% of employee deferrals, capped at 6% of compensation, but you have flexibility to choose a structure that aligns with your budget and goals.

Administrative Requirements and Testing

With the benefit of broad participation comes additional responsibility. Traditional 401(k) plans must pass annual non-discrimination tests—namely the ADP (Actual Deferral Percentage) and ACP (Actual Contribution Percentage) tests—to ensure highly compensated employees don’t receive disproportionate tax advantages. You’ll also file Form 5500 each year to report plan operations, and you must distribute a Summary Plan Description (SPD) and other ERISA notices. Many businesses enlist a third-party administrator (TPA) or recordkeeper to manage testing, filings and participant communications.

Pros and Cons

Pros:

• High visibility and perceived value among employees
• Ability to offer both salary deferrals and employer match/profit sharing
• Encourages workforce-wide retirement participation

Cons:

• ERISA nondiscrimination testing and Form 5500 filings add complexity
• Higher setup and ongoing administrative costs
• Matching obligations can strain cash flow in lean years

When to Consider a Traditional 401(k)

A Traditional 401(k) makes sense if your business has a stable headcount and you’re prepared to invest in benefits that set you apart in the job market. Firms with 20+ employees often find that the cost and complexity pay off through enhanced recruitment and retention. If you’re comfortable delegating compliance to a TPA or adviser—and budgeting for annual testing fees—a 401(k) may be the right fit to deliver a competitive retirement benefit.

5. Profit-Sharing Plan

Profit-sharing plans let you tie retirement funding directly to your company’s bottom line. Rather than a fixed match, you decide each year what portion of profits to share with employees. This discretionary approach can align your retirement contributions with cash flow—rewarding your team in good years and preserving capital when times are lean.

How Profit-Sharing Plans Work

Under a profit-sharing arrangement, you allocate a percentage of pre-tax profits to participant accounts. Common allocation methods include:

• Pro rata: Every eligible employee receives the same percentage of compensation.
• Integrated: Allocations favor higher earners relative to the Social Security wage base.
• Age-weighted: Older employees receive larger credits, reflecting shorter horizons to retirement.

You choose your contribution formula and funding amount before the plan’s annual deadline, then direct your plan administrator to distribute the contributions accordingly.

Contribution Flexibility and Limits

For 2025, you can contribute up to:

• 100% of an employee’s compensation, with
• a maximum of $70,000 per participant (indexed annually).

Contributions are entirely discretionary. Skip or reduce funding in lean years, then amplify it when profits permit—always adhering to your plan’s vesting schedule and uniform allocation rules.

Tax Implications

Employer contributions to a profit-sharing plan are fully tax-deductible, lowering your business’s taxable income in the funding year. Meanwhile, employee accounts grow tax-deferred until distributions begin—typically after age 59½—enhancing the power of compounding.

Pros and Cons

Pros:

• Directly links employee retirement benefits to company performance
• Encourages a shared sense of ownership and motivation
• Discretionary contributions provide cash-flow flexibility

Cons:

• Variable contributions can complicate budgeting
• Mandatory allocations for all eligible employees under the chosen formula
• Plan setup and ongoing recordkeeping require accurate profit calculations

Suitability for Your Business

A profit-sharing plan is a great match if you:

• Experience fluctuating revenues and need flexible funding
• Want to reward employees in line with company success
• Prefer control over annual retirement outlays rather than fixed matching requirements

External Resource

For more on crafting a profit-sharing strategy that suits your business, explore CWG Advisors’ guide to small-business profit-sharing plans.

6. Cash Balance Pension Plan

A Cash Balance Pension Plan is a hybrid defined benefit arrangement that credits each participant with an “account”—a notional balance that grows through employer contributions plus a guaranteed interest credit. Unlike a traditional pension where benefits are expressed as a monthly lifetime income, this design feels more familiar to employees accustomed to 401(k)-style statements. For small business owners, it offers the potential for exceptionally high, predictable contributions.

What Is a Cash Balance Plan?

In a Cash Balance Plan, your company promises two components each year:

• A pay credit, typically a percentage of compensation or a flat dollar amount.
• An interest credit, which can be a fixed rate (say, 4%) or tied to an index (like the 10-year Treasury rate).

Though each participant sees a growing hypothetical account, legally the employer bears all investment risk and must fund the plan to meet those promised credits.

Contribution Potential and Age Considerations

One of the biggest draws is the ability to stash far more than typical defined contribution caps. Because a Cash Balance Plan is age-sensitive, older owners can vault past six-figure contributions—often exceeding $300,000 annually—depending on their age, compensation, and the plan’s formula. In your 50s or 60s, you can accelerate savings at a rate that outpaces SEP IRAs or Solo 401(k)s.

Tax Treatment and Growth

Employer contributions to a Cash Balance Plan are fully tax-deductible, lowering your business’s taxable income in the funding year. Earnings on the notional accounts accrue at the guaranteed interest credit, not subject to market volatility, and grow tax-deferred until distribution—typically upon retirement or plan termination.

Pros and Cons

Pros:

• Supercharged contribution limits, especially for older owners
• Predictable benefit credits simplify long-term retirement projections
• Tax-deferral on plan assets and immediate deductions for employer contributions

Cons:

• High setup and annual administration fees, including actuarial valuations
• Mandatory funding requirements; skipping contributions isn’t an option
• Complex compliance and IRS filings compared to defined contribution plans

Ideal Candidates and Use Cases

A Cash Balance Pension Plan shines for:

• High-earning business owners in their late 40s and beyond looking to “catch up”
• Companies with stable cash flow that can commit to annual funding
• Firms wanting a retirement vehicle that delivers predictable, significant savings

For a deeper dive into how a Cash Balance Plan can supercharge your savings, check out this analysis by Baskin Financial on Cash Balance Pension Plans.

7. Traditional IRA (Individual Retirement Account)

An Individual Retirement Account (IRA) offers a straightforward, cost-effective way for business owners to sock away extra retirement savings without any employer-sponsored plan. You open and own the account in your name—no ERISA testing, no matching obligations, and minimal paperwork. This DIY approach makes a Traditional IRA an attractive supplemental vehicle alongside a SEP IRA, Solo 401(k), or any employer plan you already maintain.

Overview and Accessibility

A Traditional IRA is available to anyone under age 73 (subject to IRS rules) who has earned income. You choose the financial institution—from discount brokers to local banks—and select from a broad universe of investments, including mutual funds, ETFs, stocks, bonds, and more. Because the account is individual, there’s no plan document or annual Form 5500 filing, and you manage contributions and distributions directly with your custodian.

Contribution Limits and Eligibility

For tax year 2024, you can contribute up to $7,000 to a Traditional IRA, with an additional $1,000 catch-up if you’re age 50 or older. In 2025, those limits rise to $7,000 and $8,000, respectively—check annual IRS updates to confirm. Note that deductibility of your contribution depends on your modified adjusted gross income (MAGI) and whether you (or your spouse) participate in another employer plan. If your income exceeds IRS phase-out ranges, your deductible contribution may be reduced or eliminated, though you can still make non-deductible contributions.

Tax Benefits

Contributions to a Traditional IRA may be fully or partially tax-deductible, reducing taxable income in the year you contribute. The investments then grow tax-deferred until you begin withdrawals—generally after age 59½—allowing compounding to work without an annual tax drag. When you take distributions in retirement, they’re taxed at ordinary income rates. Required Minimum Distributions (RMDs) begin at age 73, ensuring the IRS eventually recoups deferred taxes.

Pros and Cons

Pros:

• Broad investment choices and low account fees
• Simple setup and no employer involvement
• Potential for tax-deductible contributions

Cons:

• Relatively low annual contribution limits
• No employer match or profit-sharing component
• Income limits may restrict full deductibility

Best Fit for Small Business Owners

A Traditional IRA is ideal for owners who:

• Lack access to any employer-sponsored plan or want an extra savings vehicle
• Seek a low-cost, flexible option to supplement a SEP IRA or Solo 401(k)
• Prefer minimal administrative hassle and full control over investment selection

By pairing a Traditional IRA with other retirement accounts, small business owners can maximize their annual deductions and build a diversified nest egg without adding ERISA-level complexity.

8. How to Choose the Right Retirement Account for Your Business

Picking the ideal retirement plan isn’t just about chasing the highest tax deduction or the largest contribution limit. It’s about matching a plan’s features to your company’s legal structure, cash flow patterns, and the needs of your workforce—while keeping administration manageable and staying onside with ERISA and IRS rules. Use the framework below to pinpoint which account type aligns best with your goals.

Assess Your Business Structure and Cash Flow

First, look at how your business is organized. If you’re a sole proprietor or single-member LLC with minimal payroll, a Solo 401(k) or SEP IRA may fit nicely: they let you steer contributions as owner and employee without stretching to cover a large staff. Corporations and partnerships, on the other hand, might lean toward plans that accommodate multiple employees—like a Traditional 401(k) or SIMPLE IRA.

Next, size up your cash flow. Do revenues swing sharply with seasonality or industry cycles? Plans with discretionary employer contributions—such as SEP IRAs or profit-sharing plans—let you dial funding up or down based on profit. If you prefer predictable annual commitments, a SIMPLE IRA or Traditional 401(k) match may be easier to budget.

Consider Employee Demographics and Participation Goals

Your workforce makeup plays a big role. For a team of ten or fewer, a SIMPLE IRA can drive higher participation because accounts are individually owned and employees see direct payroll-deducted savings. In larger staffs, ERISA testing under a Traditional 401(k) ensures contributions don’t favor high earners, but the extra compliance steps may deter some sponsors.

Think about turnover, too. Businesses with high churn may not benefit from complex plans with vesting schedules and mandatory employer contributions. In that case, a SEP IRA—with flexible, employer-only funding—minimizes administrative waste when employees come and go.

Evaluate Administrative Complexity and Costs

Every plan carries setup fees, yearly maintenance charges, recordkeeping expenses and, in some cases, actuarial or testing costs. SEP IRAs and SIMPLE IRAs rank lowest on complexity: no annual Form 5500 filings, no nondiscrimination tests, minimal paperwork. Solo 401(k)s require Form 5500 once assets exceed $250,000 and can demand a bit more tracking. Traditional 401(k)s, profit-sharing plans and cash balance pensions incur the highest compliance overhead—testing, third-party administration, actuarial valuations—so budget accordingly or partner with a TPA like Summit Consulting Group to shoulder the burden.

Weigh Tax Implications and Future Objectives

Finally, map your current tax position against anticipated future rates and your exit strategy. Pre-tax plans (most Traditional 401(k)s, SEP IRAs, profit-sharing, cash balance) offer an immediate deduction, which can be crucial in high-margin years. Roth options—available in Solo 401(k)s and some 401(k) plans—sacrifice today’s deduction in exchange for tax-free withdrawals, a smart choice if you expect to be in a higher bracket down the road.

Also consider owner succession: if you plan to sell or transfer the business, locked-in defined benefit credits (as in a cash balance plan) may not transfer smoothly, whereas portable defined contribution accounts follow the individual. Align your plan selection with both your retirement timeline and the legacy you intend to leave behind.

9. Steps to Establish and Maintain Your Retirement Account

Setting up a retirement plan is just the beginning. Ensuring it runs smoothly and stays compliant requires a systematic approach—from choosing the right partners to keeping participants informed. Below is a roadmap that covers every stage of the process.

Selecting a Provider and Plan Document

First, you’ll need to identify the professionals and tools that will bring your plan to life:

• Third-Party Administrators (TPAs): Look for a TPA with deep ERISA expertise, transparent pricing, and a track record of timely filings.
• Recordkeepers: Choose a provider whose online portal makes census uploads and participant statements painless.
• Investment Managers: If you want outsourced fiduciary oversight of your fund lineup, seek a 3(38) investment manager to handle selection, monitoring, and rebalancing.
• Independent Fiduciaries: To shift liability for administrative and investment decisions, consider working with independent fiduciaries like Summit Consulting Group, which can serve as a 3(16) administrator and ERISA section 402(a) Named Fiduciary.

Once you’ve chosen your partners, you’ll adopt a formal plan document. This blueprint defines eligibility, vesting, contribution formulas, distribution rules and other key provisions. Review it carefully to confirm it reflects your business goals and budget.

Plan Setup and IRS Filings

After signing your plan document, you’ll move into the official setup phase:

1. Plan Adoption Deadlines:

   • Defined contribution plans (e.g., 401(k), profit-sharing) generally must be adopted by December 31 of the plan year you want to cover.
   • SEP and SIMPLE IRAs have later adoption windows—often through the business’s tax-filing deadline (including extensions).

2. Employer Identification Number (EIN):

   • If you don’t already have one for your plan, request an EIN from the IRS.

3. IRS Determination Letter (Optional):

   • While not mandatory, securing a favorable determination letter provides extra assurance that your plan meets IRS qualification requirements.

4. Form 5500 Filing:

   • Most plans with 100 or more participants, or 401(k) plans regardless of size, must file a Form 5500 annual report. Solo 401(k) plans only file once assets exceed $250,000.

Mark these deadlines on your calendar, or better yet, let your TPA or recordkeeper handle the reminders.

Recordkeeping and Yearly Maintenance

Consistent recordkeeping ensures accurate contributions and keeps compliance tasks manageable:

• Census Data Collection:
  • Gather employee demographics, compensation and hire dates at year-end (or plan entry date).
• Contribution Calculations:
  • Work with your recordkeeper to apply the correct formula—whether it’s a percentage of pay, profit-sharing allocation or age-weighted credit.
• Compliance Testing:
  • For ERISA-governed plans (Traditional 401(k), profit-sharing), your TPA will run ADP/ACP tests and top-heavy analyses, then recommend corrections if needed.
• Distribution Processing:
  • Handle participant-requested withdrawals, loans and hardship distributions per plan rules, ensuring any required tax withholdings or documentation (like QDROs) are in place.

By automating as much as possible—census feeds, payroll integrations and electronic distributions—you reduce manual errors and free up time for strategy.

Participant Communication and Enrollment Process

A retirement plan only delivers value if your people understand it and participate:

• Enrollment Meetings:
  • Kick off each new plan year with workshops or one-on-one sessions that explain eligibility, contribution options and matching formulas.
• Required Notices:
  • Distribute Summary Plan Descriptions (SPDs) within 90 days of plan entry, safe harbor and auto-enrollment notices (if applicable) before the start of each plan year, and blackout notices at least 30 days in advance of any prohibited transaction period.
• Ongoing Education:
  • Provide quarterly or annual investment performance updates, retirement-readiness tools and access to fiduciary advice—either in-house or through your providers.

Clear, consistent communication not only boosts participation rates but also strengthens your fiduciary position by demonstrating prudent plan administration.

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Following these steps will help you establish a robust retirement plan, maintain compliance, and deliver a meaningful benefit to both your business and your employees.

10. Fiduciary Responsibilities and Compliance Requirements

When you sponsor a retirement plan, you also assume fiduciary responsibilities under ERISA that protect participants’ interests and safeguard your business from liability. Meeting these obligations requires understanding who acts as a fiduciary, what duties they owe, and how to stay compliant with reporting and disclosure rules.

Defining Fiduciary Roles Under ERISA

Under ERISA, anyone who exercises discretionary authority or control over plan management or assets is a fiduciary. That can include:

• A 3(16) administrator: Responsible for day-to-day plan operations like enrollment, distributions, and government filings.
• A 3(38) investment manager: Charged with selecting, monitoring, and replacing plan investments.
• An ERISA section 402(a) Named Fiduciary: Often the sponsoring employer or board, holding ultimate responsibility for plan decisions.

You can delegate certain tasks—such as investment selection or recordkeeping—to these fiduciary roles, but you retain an overarching duty to prudently choose and oversee any service provider.

Core Fiduciary Duties: Prudence, Loyalty, Diversification

ERISA sets out three cornerstone duties for plan fiduciaries:

1. Prudence: Act with the care, skill, and diligence that a prudent professional would use. This means documenting your decision-making process and reviewing provider performance regularly.
2. Loyalty: Put participants’ interests ahead of your own. Avoid any conflict between plan operations and personal or corporate gain.
3. Diversification: Offer a well-rounded menu of investment options to minimize the risk of large losses. A diverse lineup helps participants tailor their portfolios to their risk tolerance and retirement horizon.

Fulfilling these duties isn’t a one-time event. Ongoing monitoring—meeting quarterly with advisers, auditing fees, and updating the investment lineup—is critical to demonstrating that you’ve acted in participants’ best interests.

Avoiding Prohibited Transactions

ERISA strictly prohibits transactions that benefit “parties in interest” at the expense of participants. Common examples include:

• Selling plan assets to the sponsoring employer.
• Lending money or extending credit to plan fiduciaries.
• Using plan assets for personal purposes.

Violating these rules can result in excise taxes and personal liability. To stay compliant, establish a written conflict-of-interest policy, require disclosures from service providers, and review any transaction involving plan assets through the lens of fiduciary duty.

Reporting and Disclosure: Form 5500, SPD, Timely Deposits

ERISA’s reporting and disclosure requirements ensure transparency and protect participants. Key obligations include:

• Filing Form 5500 annually for plans with 100 or more participants (and for any 401(k) plan regardless of size).
• Distributing a Summary Plan Description (SPD) to eligible employees within 90 days of enrollment and updating it when material changes occur.
• Making participant contributions timely, which for plans with fewer than 100 participants generally means depositing deferrals within seven business days of withholding.

For detailed guidance on these responsibilities, refer to the Department of Labor’s resource for small business plan sponsors: https://www.dol.gov/agencies/ebsa/employers-and-advisers/small-business-owners/understanding-your-responsibilities.

Consistent adherence to these fiduciary and compliance requirements helps mitigate risk, build trust with your workforce, and ensure your retirement plan remains an effective tool for long-term savings.

11. Taking Action on Your Retirement Strategy

You’ve explored a range of retirement accounts for small business owners—from the flexible SEP IRA and high-saving Solo 401(k) to SIMPLE IRAs, Traditional 401(k)s, profit-sharing plans, Cash Balance pensions, and IRAs. Now it’s time to turn insight into action.

Start by revisiting the decision framework in Section 8. Align each plan’s contribution limits, tax treatment, and administrative requirements with your business structure, cash-flow patterns, and workforce goals. Then narrow your shortlist:

• Assess your cash-flow seasonality and decide if you need discretionary funding (e.g., SEP IRA, profit-sharing) or fixed contributions (e.g., SIMPLE IRA, Traditional 401(k) match).
• Consider employee demographics and desired participation rates—in smaller teams, individual account ownership (SIMPLE or SEP IRAs) drives engagement; larger staffs may benefit from a full 401(k) lineup.
• Weigh complexity and cost. If you’d rather avoid nondiscrimination testing and Form 5500 filings, a SEP or SIMPLE IRA could suffice; if you’re ready for a robust benefit and don’t mind TPA support, a Traditional 401(k) or Cash Balance plan may be justified.
• Match your tax strategy and succession goals. Pre-tax plans deliver an immediate deduction, while Roth options build tax-free income. Defined benefit credits aren’t portable, so factor in any planned business sale or ownership transfer.

Once you’ve settled on one or two contenders, it’s time to formalize your choice:

1. Document your plan design and adopt the official plan agreement.
2. Select your providers—TPA, recordkeeper, and (if needed) a 3(38) investment manager or 3(16) plan administrator.
3. File any required IRS forms—Form 5500, determination letter application, or IRA setup paperwork—and notify employees of eligibility and enrollment dates.
4. Integrate census data and payroll deferrals, establish deposit schedules, and schedule annual compliance testing or actuarial valuations.

Ready to make your retirement plan a reality? Summit Consulting Group provides independent fiduciary oversight, plan administration, and ERISA expertise—so you can free up time, reduce liability, and ensure compliance. Visit Geaux Summit for expert plan administration and fiduciary services to get started today.