Our fellow bloggers at Slate magazine’s BizBox blog have been following what the general business media have saying about 401(k) plans for small businesses. Their most recent post on the topic, The 401(k) Question Continued … picked up on an article in U.S. News and World Report, What Small Business Owners Need to Know About 401(k)’s, that focused solely on 401(k) plans as the best retirement vehicle for business owners.
But as I indicated in an earlier post, Which way to the best retirement plan?, what’s best is based on the specific set of facts and circumstances. One size doesn’t fit all.
While you don’t read a lot about them, SIMPLEs and SEPs do have their advantages for the business owner. SIMPLEs permit salary reduction contributions and matching contributions, and SEPs allow employer contributions of up to 25% of compensation. Both have substantially less documentation and compliance requirements (and expense) compared to a qualified retirement plan, i.e., 401(k)/profit sharing plan, but the trade-off is less design flexibility and plan features.
So 401(k) as a slam dunk? Maybe more like a jump ball.