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Retirement Plans for Small Business

Small business retirement plans offer employers and their employees a tax-advantaged way to save for retirement. The employer's contributions to a small business retirement plan may be tax deductible1 and employee contributions are made through pre-tax salary deferrals. Earnings generally grow tax-deferred until they are withdrawn. Whether you have a staff of 1 or 100, offering a competitive retirement plan is an important benefit that can help you attract and retain valuable employees.

Retirement plans for small businesses include:

  • Simplified Employee Pension (SEP) IRA
  • Savings Incentive Match Plan for Employers (SIMPLE) IRA

Here's a summary of how the different plans compare. Further information is available on the detail pages for each plan type.

Who it's For
Self-employed individual or small business owner, including those with employees Businesses with 100 or less employees who do not currently maintain any other retirement plan
Key Benefits
  • Flexible, discretionary contributions
  • Range of investment choices
  • Salary deferral plan
  • Range of investment choices
Who Can Contribute
Funded by employer Funded by employee deferrals and employer contributions
Employee Contribution Limits N/A; funded solely by employer contributions Up to $13,000 for 2019; for individuals aged 50 or over: $16,000 for 2019
Employer Contribution Limits Up to the lesser of:
  • 25% of the employee's compensation,² or
  • $56,000 for 2019 ($55,000 for 2018)
Required $1-for-$1 match, up to 3% of compensation, or 2% non-elective contribution up to certain limits3

Retirement Planning

Financial planning can be complex. We provide information and strategies to help you navigate the world of investing.

Learn more >

1Subject to certain limits.

2An employer cannot consider the part of an employee's compensation over $280,000 for 2019 ($275,000 for 2018) when calculating the contribution limit.

3If an employer chooses to make 2% non-elective contributions for each eligible employee, an employer cannot consider the part of an employee's compensation over $280,000 for 2019 ($275,000 for 2018) when calculating the contribution limit.

Current tax planning strategies emphasize the deferral of current income taxes, on the basis that your federal income tax rate may be lower at retirement. As you decide how much to defer, please keep in mind that federal income tax rates are unpredictable and subject to significant fluctuation. It is possible that federal income tax rates at the time you take a distribution (e.g., at retirement) may be higher than tax rates at the time of deferral. Other factors, including any other sources of income and state income tax rates, may also change the tax bracket and overall tax rate to which you may be subject in the future. Please consult with your tax advisor for an individualized tax planning strategy and advice. The Hartford does not predict or in any way guarantee favorable tax results.

This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice.