Are you trying to decide on a retirement plan for your small business? If so, you may be stuck between a few different options. Some of the most common types of small business retirement plans include the Savings Incentive Match Plan for Employees and the 401k.

According to plan provider Ubiquity, both of these plans have their benefits, just as both plans have their potential downsides. If you’re unsure of which option is best for your small business, check out the following comparison guide!

What are the Benefits of the SIMPLE IRA?

The SIMPLE IRA offers a number of compelling benefits.

First and foremost, the plan enables eligible contributors to invest up to $14,000 per year if they are under the age of 50, and $16,500 per year if they are over the age of 50. This is a nice amount of money that can translate to big savings down the road.

Secondly, the SIMPLE IRA is only available to companies with fewer than 100 employees. Therefore, for businesses that have no plans to grow past this number of employees, the plan is an excellent option.

Thirdly, SIMPLE IRA plans are, as the name implies, very simple to set-up and maintain. There is very little that needs to be done by the business owner each year and employees have few responsibilities as well. For those companies that are looking for a retirement solution which will enable them to basically “set it and forget it”, the SIMPLE IRA is a compelling option.

Also Read: The 2021 Guide to Empowering Remote Finance Teams

What are the Benefits of a 401k Plan?

Similar to the SIMPLE IRA, the 401k is a great option for many businesses.

In terms of contribution limits, the 401k offers much higher options than the SIMPLE IRA. In fact, eligible employees can contribute $20,500 per year if they are under the age of 50, and $27,000 per year if they are over the age of 50.

For companies that have big aspirations and plan to grow well beyond 100 employees, the 401k plan is essential. Furthermore, 401k plans can be initiated for very small companies as well. There is no ceiling or floor as far as the number of employees that can included in a 401k plan.

Additionally, 401k plans do not impose employer matching requirements. With a SIMPLE IRA, employers are required to match employee contributions or make nonelective contributions to all employee plans. This is not the case with a 401k. Employers can choose to match employee contributions with a 401k, but there is no legal requirement.


Selecting a retirement plan for your employees is no small task. There are tons of considerations that need to be made based on the size of your company, your current needs, and your future plans. For most small businesses, the 401k plan makes sense as it allows for more flexibility and the possibility of future growth. That being said, there are numerous compliance requirements that come with 401k plans, which are not necessary components of SIMPLE IRAs.

If you’d like to discuss your individual needs further, contact a plan provider today!

Review How to Choose Between SIMPLE IRA and 401k.

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