When start-ups first launch, their focus is usually on keeping costs low. Most businesses need to build a brand and gain stability before spending money on anything beyond the basics.
But once your business has grown past that initial stage, it’s time to think about investing in your employees. One way to do this is by offering a retirement plan. This not only shows employees you care about their future but also helps attract and retain top talent.
Is your business ready to take this step? Let’s look at three popular retirement plans for growing companies.
1. Traditional 401(k) Plans
A 401(k) plan is a flexible option for businesses of any size. Here’s how it works:
Employees contribute pre-tax money from their paychecks, reducing their taxable income.
Employers can also contribute, with the option to set up a vesting schedule (a timeline for employees to fully own employer contributions).
Contributions grow tax-deferred, but withdrawals are taxed.
For 2025, employees can contribute up to $23,500, with an extra $7,500 allowed for those aged 50 or older. The combined limit for employee and employer contributions is $70,000.
Some 401(k) plans offer a Roth option, where contributions are made with after-tax money, but withdrawals in retirement are tax-free.
Setting up a 401(k) involves creating a plan document, arranging a trust for plan assets, and filing annual paperwork (Form 5500). A “safe harbor” 401(k) can simplify compliance by skipping certain tests for fairness.
2. SEP-IRAs
If a 401(k) feels too complex, consider a Simplified Employee Pension Individual Retirement Account (SEP-IRA). Here’s why it’s simpler:
Only employers contribute to SEP-IRAs. Contributions immediately belong to employees (no vesting schedule needed).
There’s no annual filing requirement for the business.
In 2025, employers can contribute up to 25% of an employee’s compensation, capped at $70,000. You also have the flexibility to decide each year how much to contribute—or whether to contribute at all.
3. SIMPLE IRAs
A SIMPLE IRA is another easy option, but it’s limited to businesses with 100 or fewer employees. Here’s how it works:
Employees can choose to contribute, but it’s not required.
Employers must contribute, either by:
Matching up to 3% of an employee’s pay (this can drop to 1% in two out of five years), or
Giving a flat 2% contribution, even if employees don’t contribute.
For 2025, the employee contribution limit is $16,500. Like SEP-IRAs, all contributions are fully vested right away.
Choose What’s Right for You
These are just three of many retirement plans available to growing businesses. Each has its own pros, cons, and tax benefits. If you’re unsure which plan is best, our Commercial Team can help you analyze the options and decide based on your business’s needs and budget.
Considering incorporating one of these for your growing business? Schedule an appointment with Steve or Milton today to explore your options.