If you’re a small business, offering an employee retirement plan can help you recruit and retain highly qualified talent. It also means your participating employees will pay less in taxes and you may be able to take employer contributions as a business expense deduction.

Choosing the best plan for your business can be confusing and making the right choice for your employees in order to attract and retain talent is key. Answering a few questions can help you choose the right plan:

• Do you run the company by yourself, or perhaps with a spouse?
• Do you have 100 or fewer employees?
• Does your business generate steady income, or does it vary widely from year to year?
• What are you near-term and long-term growth plans and expectations?

The Washington Technology Industry Association WTIA) Multiple Employer Plan (MEP) combines the buying power of its member companies to offer programs and services that small tech businesses could not negotiate alone. The MEP provides contribution options and investment options with multiple fund providers. Our dedicated customer service representatives also offer participant education. Additional benefits of the MEP include:

• One pricing structure
• Base plan design with flexible options
• Member governance board that oversees performance and serves as fiduciary
• Diverse investment options
• Investment advice for participants
• Audit, 5500, and compliance reporting

Before selecting the best plan for your company, it’s important to understand the basic differences between a Simple IRA, SEP IRA, and a 401(k):

An IRA Plan

With a Savings Investment Match Plan for Employees (Simple IRA) both employers and employees contribute to the plan. Employees defer a portion of their salaries and employers can either match a percentage of the employees’ contributions or choose to contribute a fixed percentage of employees’ salaries to their accounts. These plans are limited to businesses with 100 employees or fewer. They are simple to open and maintain, provide employees with many of the traditional retirement tax benefits and can provide tax benefits for employers. The employee annual limit is set at $13,500 or $16,500 if you’re 50 or older.

A Simplified Employee Pension Individual Retirement Arrangement (SEP IRA)

This is designed for small business owners and allows flexible contributions. A SEP differs from other plans in that it allows contributions from employers only and resembles a profit-sharing plan. However, while an employer has considerable flexibility under a profit-sharing plan, SEP requires an employer to contribute the same percentage to each worker. Under a SEP, only the company receives tax benefits. The annual limits for a SEP are $57,000.

A Solo 401(k) Plan

A Solo 401(k) plan is a simple and cost-effective solution for the small business owner with no employees. However, a spouse can be included in the plan. It requires little administration and allows for the same maximum tax deferrals as the traditional 401(k). The business owner can make both an employee and company contribution to the plan and contributions are not mandatory and can be made whenever profits permit.

A Traditional 401(k)

A traditional 401(k) is a flexible plan, but compliance can be complex. Participants receive tax benefits, as do employers that provide a matching contribution. One significant benefit of a 401(k) is that, under certain conditions, participants may borrow money from their account. A 401(k) MEP is a multiple employer plan.

WTIA offers plans and expertise to help your company make the best decision for its employees and your future.