Business Banking · Self-Directed Retirement and IRA · Retirement Accounts

Retirement Accounts for Employers

SIMPLE IRA (Savings Incentive Match Plan for Employees)

A Simple IRA (Savings Incentive Match Plan for Employees) is a type of retirement plan that small businesses can offer to their employees. It is designed to be a low-cost and easy-to-administer retirement savings plan that encourages employees to save for retirement. It is ideally suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan for employees.

Under a Simple IRA plan, employees can contribute a portion of their salary on a pre-tax basis, up to a certain limit. Employers are required to make up to a 3% contribution to the plan or a non-elective contribution of 2%.

One advantage of a Simple IRA plan is that it is easy to set up and maintain, with lower administrative costs than other types of retirement plans. Another advantage is that both employees and employers can make tax-deductible contributions to the plan.

Simple IRA plans have some limitations. They are only available to businesses with 100 or fewer employees, and employees cannot borrow against the funds in the plan. In addition, there may be penalties for early withdrawals from the plan if taking a disbursement within two years of the first contribution and prior to age 59 and a half.

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Requirements for Employers

  • Must have 100 or fewer employees who earned a minimum of $5,000 in the previous year.
  • Employer cannot run another employer-sponsored retirement plan simultaneously.
  • Account/Contribution deadline—must notify employees by October 1st of plan establishment and must provide annual notices.
  • Employer contributions are deductible as business expenses.
  • No “plan” tax filings with the IRS are required.
  • Mandatory matching contribution up to 3% or non-elective contribution of 2%.

Requirements for Employees

  • Must have earned a minimum of $5,000 from current employer in the past two years.
  • Must earn a minimum of at least $5,000 in the current year.
  • Benefit from tax-deferred retirement savings.
  • Pretax contributions made through payroll deduction, plus employer match.

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SEP IRA (Simplified Employee Pension Plan)

An SEP IRA (Simplified Employee Pension Individual Retirement Account) can be a good option for small business owners who want to provide a retirement savings plan for their employees while also benefiting from tax savings.

An SEP IRA is a type of retirement plan that allows employers to make contributions on behalf of their employees. It is a tax-deferred retirement savings plan for self-employed individuals or small business owners and their employees.

Under an SEP IRA, the employer makes contributions to each employee’s retirement account, including their own if they are self-employed. The contribution limit is based on a percentage of the employee’s compensation up to a maximum annual contribution..

One of the advantages of an SEP IRA is that it is easy to set up and maintain, with lower administrative costs than other types of retirement plans. There are also no annual reporting requirements for employers. Another advantage is that both employees and employers can make tax-deductible contributions to the plan.

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Requirements for Employers

  • No “plan” tax filings with the IRS are required
  • Must meet one of the following criteria: sole proprietor, business owner, participating in a partnership, or receiving self-employment income
  • Must contribute equally for all eligible employees

Requirements for Employees

  • Employer contribution and tax-deferred retirement savings
  • Employee is always 100% vested in (or, has ownership of) all SEP-IRA money

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Profit Sharing Plan

Profit-sharing plans are often used as a way to motivate employees to work harder and increase profitability of the company. They can also be a way for employers to attract and retain talented employees.

A profit-sharing plan is an employer-sponsored retirement plan that allows employees to share in the profits of the company. The employer makes contributions to the plan based on the company’s profits, and these contributions are allocated to participating employees’ accounts based on a predetermined formula. In a profit-sharing plan, the employer has discretion over the number of contributions made to the plan each year. The contributions may be a percentage of the company’s profits or a fixed dollar amount. The plan may also have a vesting schedule, which determines how long an employee must work for the company before they become fully vested in the contributions made to their account.

The contributions made to a profit-sharing plan are tax-deductible for the employer, and the earnings on the contributions grow tax-deferred until withdrawal. Employees are typically not taxed on the contributions or earnings until they withdraw the funds from the plan.

A profit-sharing plan accepts discretionary employer contributions. There is no set amount that the law requires you to contribute. If you can afford to make some amount of contributions to the plan for a particular year, you can do so. For other years, you don’t need to make any contributions. Also, your business does not need profits to make contributions to a profit-sharing plan.

If you do make contributions, you will need to have a set formula for determining how the contributions are divided. This money goes into a separate account for each employee. Learn more at

If you establish a profit-sharing plan, you:

  • Can have other retirement plans
  • Can be a business of any size
  • Need to annually file a Form 5500

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Solo 401(k)

A Solo 401(k) is a retirement plan designed for self-employed individuals or small business owners with no employees other than themselves and their spouses. It is also known as an Individual 401(k) or a Self-Employed 401(k).

A Solo 401(k) plan works similarly to a traditional 401(k) plan in that it allows an individual to save for retirement on a tax-advantaged basis. Contributions to the plan are made pre-tax, which means they are deducted from the individual’s taxable income for the year.

One of the advantages of a Solo 401(k) plan is that it allows the individual to make larger contributions than other types of retirement plans, such as a traditional IRA or a SEP IRA. It also allows for greater flexibility in terms of investment options and the ability to borrow from the plan if needed.

It’s important to note that a Solo 401(k) plan must be set up correctly and maintained properly in order to comply with IRS regulations. It’s a good idea to consult with a financial professional before setting up a Solo 401(k) plan.

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To get started, call us at 801-655-2126.

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With retirement accounts through Central Bank, we serve as custodian only. Please seek advice from a tax or legal advisor.

Investments have no guarantee, may lose value, and are not FDIC insured.

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