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    9 Replies Latest reply on Aug 28, 2008 9:08 AM by rlucisano

    401K or Simple IRA for Small Business

    roma1625 Wayfarer
      I would like to set up either a 401K or Simple IRA for my employees. I have less than 10 employees at this time (hoping to expand) and cannot afford to make any employer contribution. What is my best option?
        • Re: 401K or Simple IRA for Small Business
          LUCKIEST Guide
          1625, Welcome to this web site
          Do you have an accountant?? Lawyer?? Good question to ask them.
          If you google the question 401K or Simple "IRA for Small Business,
          there is a lot of info. Go to Members page and add
          a few words about your business
          • Re: 401K or Simple IRA for Small Business
            dublincpa Scout
            I have another client in the same position. If you do a SIMPLE, you have to either do a match or contribute for everyone regardless of participation. If you do a 401k and the owners or highly compensated employees participate, you will most likely have to set up a safe harbor or put in what is called a top heavy minimum contribution. The 401k will all but definitely have higher administration costs.

            I guess to sum it up - If you want to offer a benefit, you have to offer benefit. Just setting up a plan as a conduit for the employee contributions doesn't get anyone anywhere.

            If you don't want to bite the bullet on the SIMPLE, you might want to recommend that the EEs set up IRAs and fund them through a payroll direct deposit or something similar.

            Good luck. It ain't easy bein' at the top.
            1 of 1 people found this helpful
            • Re: 401K or Simple IRA for Small Business
              CashforBiz Newbie

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              • Re: 401K or Simple IRA for Small Business
                calbear81 Newbie
                There is employer associated expenses seting up retirement plans. Administrative costs of a 401k can be anywhere between $2,500 to $3,000 per year, plus your contributions. A SIMPLE will require a 2% accross the board or 3% matching contribution by employer on employee's income. About $25 per year administrative fee will also apply on a SIMPLE. In agreement with other post, if you do not plan to contribute, a individual Traditional or Roth IRA may probably the best choice for your employees. More info @
                • Re: 401K or Simple IRA for Small Business
                  wealthoffice Newbie
                  Here is what you need to do 1st.

                  Conduct a survey among your employees and determine that if you started a plan would they put away their own money and if so, how much (% or $ per pay period).

                  Then your employees will ask, will you match?, from your post it appears you wont but there are ways to help employees see past that--such as tax credits and such.

                  A simple plan is really not that simple, contributions are sometimes a pain and you must have it for atleast two years plus you have to match, where as the 401k has a start up cost and annual costs, but there are tax credits to help for the 1st few years of the plan; plus the money is qualified meaning almost bullet proof from creditors. Either one can be done pretty easily.

                  Just find out what your employees want.

                  You may just ask them if they want a bonus instead?

                  If you want to explore further, email me at or post for more. Good luck.
                  • Re: 401K or Simple IRA for Small Business
                    Awais1 Newbie
                    The Best way is to conducta a survey among the employee that whata they think about 401 K and they something about this.


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                    • Re: 401K or Simple IRA for Small Business
                      grega1 Newbie

                      Hi Roma,

                      The Simple IRA requires a match, so forget about it. I setup inexpensive 401k plans all of the time for businesses like yours, and no you don't have to give a match. You can offer one in the future if the company is more profitable. Call me at 800-241-7258 ext. 1074 to discuss further or e-mail me direct at


                      • Re: 401K or Simple IRA for Small Business
                        rlucisano Newbie
                        If you can't do a contribution a 401 k would work, you can find a real low cost plan for fees out there. The simple requires a contribution of some kind up to 3%. You can opt out of contribution on a simple but the 5 yr rule requires a contribution for 3 out of the 5 yrs. A 401 k doesn't require any contribution. Check with Principal they have a small company 401 k package plan. What state are you in?