Trends in Retirement Plans

SMALL BUSINESSES

Working for a small business? Your human resources role may be a little different when it comes to retirement planning.

Let's take a look at a few qualified retirement plan options for you and your employees.

Traditional IRAs

If your organization doesn't offer a retirement plan, a traditional IRA may be a good choice for your employees.

There are 2 basic types of traditional IRAs:

• regular
• spousal

A traditional IRA is a tax-deferred savings account that can act as a retirement savings account.

Employee contributions can be:

• deductible
• OR
• nondeductible

Traditional IRAs are intended for people with regular working income. Taxation won't occur until employees make withdrawals during retirement. IRA earnings are then taxed as ordinary income.

An employee can make annual contributions of up to $7,500 per year in 2026, to a traditional IRA. If the employee is 50 or older, an additional contribution of $1,100 may be made.

Roth IRAs

Any contributions to a Roth IRA are made with after-tax dollars.

Other advantages include:

• no distribution penalty on certain early withdrawals
• participation in a Roth IRA is permitted even if an employee is covered by an employer-sponsored pension plan
• contributions may be made to the plan regardless of age
• unlike other IRA plans, there are no minimum distribution requirements

Roth IRA contribution limits. In 2026, annual contribution limits are $7,500 for individuals, not to exceed 100% of total compensation. This contribution limit rises to $8,600 if you are age 50 or older.

SEP

A Simplified Employee Pension (SEP) is a qualified plan in which employers make contributions to Individual Retirement Accounts (SEP-IRAs) that have been established for their employees. SEP-IRAs are often used by small organizations that don't have any other qualified plan.

The annual employer contribution limit for 2026 is 25% of an employee’s total compensation, up to $72,000.

These plans are great for employers that need the flexibility of not having to make contributions every year.

SIMPLE-IRAs

The Savings Incentive Match Plan for Employees (SIMPLE-IRA) is a qualified retirement plan that's typically used by small organizations (100 or fewer employees) with no other qualified retirement plan. It is similar to a 401(k).

Employee contributions - Traditional

For 2026, employees may contribute up to $17,000 a year with annual increases being based on cost-of-living. The catch-up contribution for those 50 or older is an additional $4,000 with an exception for those 60-63 for whom the catch-up contribution is 5,250. Contributions to traditional SIMPLE IRAs are with before-tax dollars so distributions are taxed.

Employee contributions - Roth

Secure 2.0 permits SIMPLE IRAs to also be set up as Roth IRAs, with contributions being made with after-tax dollars. Employees may begin tax-free withdrawals at age 59½. For 2026 the contribution limit is $17,000 with the same catch-up contributions as a traditional account.

Employer contributions

The employer is generally required to match each employee's contribution on a dollar-for-dollar basis up to 3% of the employee's pay. This requirement does not apply if the employer makes nonelective contributions instead.

Lower percentage. An employer may choose to make a matching contribution of less than 3%, but it must be no less than 1% and for no more than 2 out of 5 years.

Nonelective contributions

Instead of matching contributions, an employer can choose to make a contribution equal to 2% of each eligible employee’s pay, whether the employee makes a contribution or not. If the employer makes this choice, it must make such contributions to all eligible employees. For 2026, $360,000 is the annual compensation limit used to calculate the 2% employer contribution.

Contribution limits are for both the traditional and Roth SIMPLE IRA. For example, an employee may not contribute the limit for both types of plans. They could contribute $7,000 to a Roth and $10,000 to a traditional account.

WHICH PLAN IS RIGHT FOR YOUR COMPANY? 2026 Data
	Traditional IRA	SEP-IRA	SIMPLE-IRA
Number of employees	more than 25	1-10	100 or less
Contributors	employee only	employer only	employer and employee
Annual contribution maximum	$7,500 catch-up if age 50 or older: $1,100	25% of employee’s total compensation, up to $72,000	employee: $17,000 catch-up for 50 or older: $4,000 60-63 catch-up exception: $5,250 employer: nonelective contributions of 2% of annual gross pay or 100% match of an eligible employee's contributions up to 3% of the employees pay