Workplace retirement plans for businesses
Plan for the future with strategic workplace retirement solutions to help you save on taxes, grow your business and diversify your wealth.
Why start a workplace retirement plan?
Workplace retirement plans are a dynamic tool for helping grow your business and taking control of your financial future. Some of the primary benefits of starting a retirement plan for your business include:
- A tax-advantaged way to save for your future: Employer contributions are tax-deductible for the business, and your salary deferrals may be deductible for you. Investment growth is also tax-deferred or potentially tax-free if you adopt a Roth option for your plan. This can help both you and your business save on taxes while saving for your future.
- A way to diversify your net worth: Building assets outside your business helps reduce financial risk and increases long-term security.
- A tool for attracting and retaining employees: Offering a retirement plan can make your business more competitive in the job market.
- Employee financial wellness and education: Many Americans rely on workplace plans for their long-term savings, and some plans offer education to support informed decisions.
- Potential tax credits: Small businesses may qualify for tax credits that can help offset the cost of starting a plan.
What should I consider when picking a workplace retirement plan for my business?
With so many retirement plan options available, it can be tough to know which one fits your business best. Here are the key factors to consider when making your decision:
- Number of employees: Some plan types are only available to smaller employers.
- Who can contribute: Certain plans allow employer contributions only, while others let both employers and employees contribute. This can impact how much is saved and who shares in the responsibility.
- Contributions limits: Plans vary in how much can be contributed each year, which affects how quickly you and your employees can build retirement savings.
- Employer contribution requirements: Some plans require the employer to contribute every year, which can be a great benefit for employees and potentially offer higher contribution limits for owners. Others give you the flexibility to contribute when it works for your business.
- Vesting schedule: Determines when employees gain ownership of employer contributions, which can influence employee retention and long-term plan costs.
- Ability to borrow: Some plans allow participants to take loans from their account, offering flexibility in managing short-term financial needs.
- Litigation and bankruptcy protections: Plans offer varying levels of protections. Greater protections can help safeguard savings in case of legal or financial risk.
- Administrative cost and complexity: Costs and compliance requirements vary by plan type, so it’s important to choose a structure that fits your business’s capacity and goals.
What are the retirement plan options for small businesses and business owners?
Retirement plans for businesses without employees
Simplified Employee Pension (SEP) IRA
Although any size business can establish a SEP IRA plan, it’s commonly used by self-employed individuals or businesses without employees. It’s a low-maintenance plan that allows for employer-only contributions.
Key features include:
| Attribute | SEP IRA |
| Number of employees | No maximum limit. Available to businesses of any size, including sole proprietors and self-employed individuals. |
| Who can contribute | Only the employer contributes. Employees cannot make contributions. |
| Contribution limits | Up to 25% of compensation or $70,000 (for 2025), whichever is less. |
| Employer contribution requirements | Contributions are discretionary. Employers can decide each year whether to contribute and how much (up to limits). |
| Vesting schedules | Immediate vesting. Employees own 100% of contributions right away. |
| Ability to borrow | Not allowed. Loans are not permitted from SEP IRAs. |
| Litigation and bankruptcy protections | Bankruptcy protection up to $1.7 million (2025). Outside of bankruptcy, the level of protection against lawsuits and creditors depends on state laws, which can vary significantly. |
| Administrative complexity & cost | Low. Easy to set up and maintain with minimal paperwork. |
Owner-only 401(k)
An owner-only 401(k) is a streamlined 401(k) plan for businesses that generally only employ the owner(s) and their spouse. It’s ideal for owners seeking higher contribution limits, the option to borrow from the plan and stronger protections in bankruptcy or litigation.
Key features include:
| Attribute | Owner-only 401(k) |
| Number of employees | Participation is limited to owner(s) and spouse only. The business can have part-time employees, but they must be eligible to be excluded from the plan. A part-time employee who works 500+ hours in any two consecutive 12-month periods cannot be excluded. |
| Who can contribute | Both the employer and employee can contribute. |
| Contribution limits | Employee deferrals: Up to $23,500 in 2025 ($31,000 if age 50+; $34,750 if ages 60-63). Total contributions: Up to $70,000 in 2025 ($77,500 if age 50+, $81,250 if ages 60-63) |
| Employer contribution requirements | Contributions are discretionary. Employers can choose whether and how much to contribute each year. |
| Vesting schedules | Typically, immediate for owner-only plans. |
| Ability to borrow | Yes. Loans are allowed (typically up to 50% of account balance, max $50,000). |
| Litigation and bankruptcy protections | Generally protected from lawsuits and creditors under ERISA (Employee Retirement Income Security Act of 1974). |
| Administrative complexity & cost | Moderate. More complex than SEP IRAs; annual Form 5500 filing required once assets exceed $250,000. |
Owner-only defined benefit plan
An owner-only defined plan is designed for businesses that generally only employ the owner(s) and their spouse. It's ideal for those with high, stable income who want to maximize retirement contributions, secure guaranteed retirement income and are comfortable managing a plan with high administrative complexity.
Key features include:
| Attribute | Owner-only defined benefit plan |
| Number of employees | Participation is limited to owner(s) and spouse only. The business can have part-time employees, but they must be eligible to be excluded from the plan. A part-time employee who works 500+ hours in any two consecutive 12-month periods cannot be excluded. |
| Who can contribute | Only the employer contributes. Employees cannot make contributions. |
| Contribution limits | No fixed dollar limit; can exceed $100,000–$300,000+ annually on contributions. However, contributions ultimately limited by the cap on the annual retirement benefit, which is $280,000 in 2025. |
| Employer contribution requirements | Mandatory contributions based on actuarial calculations to fund a promised retirement benefit. If the business contributes less than the calculated amount, the IRS could assess penalties and even disqualify the plan. |
| Vesting schedules | Typically, immediate for owner-only plans. |
| Ability to borrow | Yes. While uncommon, loans are permitted from defined benefit plans. |
| Litigation and bankruptcy protections | Generally protected from lawsuits and creditors under ERISA. |
| Administrative complexity & cost | High. Requires actuarial calculations, annual filings (Form 5500) and ongoing compliance. |
Retirement plans for businesses with employees
Simplified Employee Pension (SEP) IRA
Although any size business can establish a SEP IRA plan, it’s commonly used by smaller businesses with few or no employees. It’s a low-maintenance plan that allows for employer-only contributions.
Key features include:
| Attribute | SEP IRA |
| Number of employees | No maximum limit. Available to businesses of any size, including sole proprietors and self-employed individuals. |
| Who can contribute | Only the employer contributes. Employees cannot make contributions. |
| Contribution limits | Up to 25% of compensation or $70,000 (for 2025), whichever is less. |
| Employer contribution requirements | Contributions are discretionary. Employers can decide each year whether to contribute and how much (up to limits). |
| Vesting schedules | Immediate vesting. Employees own 100% of contributions right away. |
| Ability to borrow | Not allowed. Loans are not permitted from SEP IRAs. |
| Litigation and bankruptcy protections | Bankruptcy protection up to $1.7 million (2025). Outside of bankruptcy, the level of protection against lawsuits and creditors depends on state laws, which can vary significantly. |
| Administrative complexity & cost | Low. Easy to set up and maintain with minimal paperwork. |
SIMPLE IRA
A SIMPLE IRA is generally available to businesses with 100 or fewer employees. It’s best suited for employers who seek a low-maintenance retirement plan, are comfortable with making required contributions and are okay with lower contribution limits compared to other plan types.
Key features include:
| Attribute | SIMPLE IRA |
| Number of employees | Available to businesses with 100 or fewer eligible employees. Eligible employees include those who earned at least $5,000 in compensation during any two preceding years and are expected to earn at least $5,000 in the current year. |
| Who can contribute | Both the employer and employees can contribute. |
| Contribution limits | Employee deferrals: Up to $16,500 in 2025 ($20,000 if 50+; $21,750 if 60-63) Total contributions: Up to 2X salary deferrals plus $5,100 in 2025 if matching; up to $28,600 in 2025 if making non-elective contributions ($32,100 if 50+, $33,850 if 60-63) Note: Certain SIMPLE plans can contribute 110% of deferral limits, which also increases total contribution limits. |
| Employer contribution requirements | Mandatory annual contributions: Either a dollar-for-dollar match up to 3% of compensation or a 2% nonelective contribution for all eligible employees. |
| Vesting schedules | Immediate vesting. Employees own 100% of contributions right away. |
| Ability to borrow | Not allowed. Loans are not permitted from SIMPLE IRAs. |
| Litigation and bankruptcy protections | Bankruptcy protection up to $1.7 million (2025). Outside of bankruptcy, the level of protection against lawsuits and creditors depends on state laws, which can vary significantly. |
| Administrative complexity & cost | Low. Easy to set up and maintain with minimal paperwork. |
401(k)
A 401(k) plan offers the most flexibility. But it also comes with additional costs and administrative responsibilities.
Key features include:
| Attribute | 401(k) |
| Number of employees | Available to businesses of any size with one or more employees. |
| Who can contribute | Both the employer and employees can contribute. |
| Contribution limits | Employee deferrals: Up to $23,500 in 2025 ($31,000 if 50+; $34,750 if 60-63) Total contributions: Up to $70,000 in 2025 ($77,500 if 50+, $81,250 if 60-63) |
| Employer contribution requirements | Contributions can be mandatory or discretionary, depending on how you design your plan. A Safe Harbor 401(k) is a specific plan design employers may adopt to allow business owners and highly compensated employees to maximize salary deferrals, which can be otherwise limited due to testing requirements. |
| Vesting schedules | Yes, employer contributions may be subject to a vesting schedule (e.g., graded or cliff vesting). Employee contributions are always 100% vested. |
| Ability to borrow | Yes. Loans are allowed (typically up to 50% of account balance, max $50,000). |
| Litigation and bankruptcy protections | Generally protected from lawsuits and creditors under ERISA. |
| Administrative complexity & cost | Moderate to high. Requires annual filings (Form 5500), plan testing and compliance with IRS and DOL rules. |
Next steps toward a healthy financial future
Everyone’s retirement goals are different. And planning for them can be more complex when you’re a business owner. At Edward Jones, our financial advisors take the time to understand your unique situation and your vision for the future. Whether you're establishing a new retirement plan or considering a switch, we’ll help you navigate your options, align your plan with both your business and personal goals, and support your employees’ financial well-being.
Contact us today for a no-obligation consultation and start building a retirement strategy that works for you and your team.