• Pension Inc. provides complimentary contribution projections and analysis to determine if the timing is right to establish a plan or to convert from a Simple/SEP to a 401(k)
  • October 1 is the deadline for establishing safe harbor plans effective in 2016
  • November 1 is a good target for final decisions on new 401(k) plans to be established/converted for January 1
  • An employer cannot end a Simple plan in the middle of the calendar year. Once started, you must continue a SIMPLE IRA plan for the entire calendar year, funding all contributions promised in the employee notice.

Reasons for a client to move from a Simple to a 401(k) may include:

1)   Increased deferral and employer contribution limits

2)   Flexible employer contributions that may include vesting

3)   After-tax Roth 401(k) contributions are available

4)   Employer exceeded 100 employees

5)   Plan loans are available


401(k) Advantages Over SEP and SIMPLE IRAs:


  401(k)/Roth SIMPLE IRA SEP IRA
Who can contribute Employee; Employer optional Employee & Employer Employer only; must contribute for all eligible employees
Max employee contribution $18,000 w/$6,000 catch-up if over 50 years old $12,500 w/$3,000 catch-up if over 50 years old Not applicable
Employer contributions Optional, up to 25% of W-2 payroll with a $53K cap ($59,000 if over 50 years old) plus profit sharing options Required match of 100% first 3% of participating employee contributions or 2% of all eligible employee salaries Optional, but only way to fund; up to 25% of W-2 payroll with a $53K cap
Vesting timing for employer contributions Multi-year options or immediate Immediate Immediate
Access to funds before age 59½ Penalty-free loans or 10% penalty for early withdrawal 25% penalty for withdrawing within first 2 years of participating; 10% thereafter 10% penalty for withdrawal before age 59½