Retirement plan guide for business owners · 2026 figures
Choosing a retirement plan for your business
For each of the main plans, this guide sets out the tax impact for you and the business, and what the plan costs to start and run: provider fees, filings and your own time.
No employees
Just you, or you and your spouse
Freelancers, consultants and side businesses. Usually a SEP IRA or a Solo 401(k); when profits are high and steady, a cash balance plan gives a much larger deduction.
See the deduction at your profit ↓Start on page 4, then page 5 With employeesYou have employees
The plan must cover eligible staff, so what the business puts in for them is a cost as well as a deduction. Usually a SIMPLE IRA or a 401(k); tax credits can cover most plan fees for three years.
Start with the decision guide ↓Start on page 4, then pages 3 and 6–8EmployeesAn employee yourself, or want something to hand your staff? A separate two-sided employee sheetemployee sheet covers workplace plans, IRAs and HSAs.
Tax savings
What a contribution saves you in tax
For an owner, a contribution rarely saves just “bracket times deduction.” If you take the 20% qualified business income (QBI) deduction, each dollar contributed also trims it, so the saving is usually less than your bracket rate; near the QBI phase-out it can be much more.
A lower AGI can unlock other breaks
- Less 3.8% net investment income tax, which starts at modified AGI of $200,000 single, $250,000 joint.
- More SALT deduction if you itemize: the $40,400 cap drops 30¢ for each $1 of modified AGI over $505,000 (to a $10,000 floor), so a contribution there wins it back.
- More of the $6,000 deduction at 65 and older, the child tax credit and any marketplace premium tax credit.
Keep in mind
- Deferral
- Pre-tax withdrawals are taxed as ordinary income. The saving is permanent to the extent your rate in retirement is lower.
- Roth
- 401(k), SEP and SIMPLE plans can take Roth money if the plan offers it: no deduction now, tax-free withdrawals later. This guide’s savings assume pre-tax. W-2 pay over $150,000 from the business in 2025 makes 2026 401(k) catch-ups Roth; self-employment income doesn’t count.
- QBI floor
- From 2026, if your active business income is at least $1,000, your QBI deduction is at least $400.
- Timing
- Business contributions to a SEP or 401(k) count for 2026 if paid by the return’s due date, extensions included, so you can size them once the year’s numbers are in.
Business owners
The main plans side by side
The shaded rows show what each plan asks of you: money to start, money to run it, and your own time. Prices are typical 2026 ranges; your quotes will vary.
| Feature | SEP IRASimplified Employee Pension | SIMPLE IRAFor 100 or fewer employees | Solo 401(k)Owner and spouse only | 401(k)With employees | Cash balanceA defined benefit plan |
|---|---|---|---|---|---|
| Best for | Owners with few or no staff who want the simplest plan | Small employers who want staff to save, at low cost | The self-employed with no staff but a spouse | Employers who want high limits and loans | Owners who want a much larger deduction and can commit to funding it every year |
| Who puts money in | The business only | Employees from pay, plus a required match of up to 3% (or 2% for all) | You, both as the employee and as the business | Employees from pay, plus any match or profit sharing | The business only; an actuary sets the yearly amount, which is required even in a bad year |
| Employees included? | Yes, at the same % of pay | Yes, everyone earning $5,000+ | Only a spouse; any hire who becomes eligible, even a part-timer, ends it | Yes; most new plans must auto-enroll them | Yes; must pass coverage tests |
| Last day to start for 2026 | Your tax filing deadline, with extensions | Oct 1, 2026 | Dec 31, 2026 (a sole owner with no staff: April 15, 2027) | Oct 1, 2026 for a safe harbor match; Dec 31 otherwise | Your tax filing deadline, with extensions |
| Setup cost | $0 | $0 | $0; $285–$999 if customized | About $500; up to $1,500 | $1,300–$3,500 |
| Setup time | About 5 hours of paperwork | About 7 hours; staff get a 60-day sign-up window | A few days; up to 3 weeks with a rollover | 1–2 months | 1–2 months |
| Yearly cost | $0 | $0; up to $80 per employee, from their accounts | $0; $125–$600 if customized | $1,500–$4,500 with 10 staff, plus asset fees from employee accounts; audit (about $10,000–$15,000) at 100+ participants with balances | $2,000–$4,000; plus $111 per participant to the PBGC, unless it covers only owners or is a professional practice with 25 or fewer participants |
| Your time each year | No yearly filing | 15 minutes for the yearly staff notice; no filing | None until assets top $250,000; then Form 5500-EZ (IRS: 6 to 28 hours) | A few hours, plus up to 30 minutes per payroll deposit | About 9½ hours of filings, mostly the actuary’s |
| Government filing | None | None | Form 5500-EZ once assets top $250,000 | Form 5500 every year, plus a fidelity bond | Form 5500 with an actuary’s Schedule SB |
Safe harbor 401(k): the business commits to a set contribution, such as 3% of pay for everyone or a match worth up to 4% of pay, fully vested, and the plan skips the yearly fairness tests that can limit what owners save.
Nonprofits and public schools use a 403(b), which follows the 401(k) column; a public school’s plan files no Form 5500, and a nonprofit’s plan with only employee money can skip it if the employer’s role stays within a narrow Labor Department safe harbor. Governments add a 457(b), with its own separate limit.
Start here
Which plan fits your business?
As the owner, you pick the plan, sign the paperwork, and keep it running each year. The choice comes down to three questions: do you have employees, how large a deduction do you want, and how much upkeep will you take on?
1Do you have employees?A spouse who works in the business doesn’t count, and can join your plan. Part-time workers may count.
No: it’s just me (and my spouse)
2How large a deduction do you want?
A share of profit, with the least paperworkSEP IRAStart by your tax filing deadline
The largest a one-person plan allowsSolo 401(k)Open by Dec 31
Even more, but you must fund it every year: up to $204,000 at age 50 in 2026Cash balance planAn actuary designs it
Yes: I have employees
2What matters most to you?
Low cost and little upkeep; staff save from pay (100 or fewer employees)SIMPLE IRAStart by Oct 1
Only the business puts money in, and the amount can change each yearSEP IRAStart by your tax filing deadline
Higher limits and loans; staff can save a lot401(k)Safe harbor match: start by Oct 1
Owners want a much larger deductionCash balance planAn actuary designs it
We’re a nonprofit or a public school403(b)Works much like a 401(k)
Setup deadlines for 2026
- Oct 1, 2026
SIMPLE IRA, or a 401(k) with a safe harbor match. They need time for employees to sign up.
- Dec 31, 2026
A Solo 401(k) or other 401(k) that will take savings from 2026 pay.
- Your 2026 filing deadline
SEP IRA, profit sharing and cash balance plans, extensions included. A sole owner with no staff can also start a first-year Solo 401(k) by April 15, 2027.
Employees you must include
SEP IRA
Everyone 21 or older who worked for you in 3 of the last 5 years and earns at least $800. Each gets the same percentage of pay you give yourself, a spouse on the payroll included.
Everyone 21 or older who worked for you in 3 of the last 5 years and earns at least $800. Each gets the same percentage of pay you give yourself, a spouse on the payroll included.
SIMPLE IRA
Everyone who earned at least $5,000 in any 2 earlier years and is expected to earn $5,000 this year.
Everyone who earned at least $5,000 in any 2 earlier years and is expected to earn $5,000 this year.
401(k)
Generally everyone 21 or older after a year of service (1,000 hours). Part-timers with 500+ hours in 2 straight years must be allowed to save from pay.
Generally everyone 21 or older after a year of service (1,000 hours). Part-timers with 500+ hours in 2 straight years must be allowed to save from pay.
A plan can use looser rules than these, never stricter ones. If you or your family own more than one business, or one works closely with another, the rules may treat them as one employer, and its staff count too. In 15 states with an open auto-IRA program (not Florida), a business with no plan may have to sign its staff up for the state’s.
No employees
How much can a self-employed owner put away?
For a one-person business, the plans differ most in how much you can put away. A Solo 401(k) usually allows the most, because money goes in both from your pay and from the business.
$100,000
Federal income tax saved assumes the business profit is your household’s only income, the standard deduction and 2026 rates. The QBI deduction is figured for a business with no W-2 wages or equipment; it phases out above $201,750 of taxable income single, $403,500 joint, and faster for professional services (law, accounting, health, consulting and similar). Self-employment tax is the same either way.
Most you could put in for 2026, by net profit
Sole proprietor under age 50, no employees
Where the money comes from at $100,000 profit
Good to know
- S corporation owners: the percentages apply to your W-2 wages, not to profit.
- Hiring soon? Once an employee is eligible, even a part-timer with 500+ hours in 2 straight years, a Solo 401(k) must let them save from pay, making it a regular 401(k). A SEP must give eligible employees the same percentage you give yourself.
- Cash balance plan: a separate plan that can give a deduction well over $100,000 a year for owners in their 50s and 60s, for about $2,000–$4,000 a year in actuary and admin fees.
| Net profit | SEP IRA | SIMPLE IRA | Solo 401(k) | Federal tax savedat the Solo 401(k) maximum |
|---|
How we figured it: sole proprietor with no other workplace plan; business share is 20% of net profit after the deduction for half of self-employment tax ($184,500 Social Security wage base). Solo 401(k) adds a $24,500 salary deferral. SIMPLE uses the $18,100 limit for businesses with 25 or fewer employees, plus a 3% match on net earnings. Catch-up from age 50: $8,000 in a Solo 401(k) ($11,250 at 60–63), $3,850 in a SIMPLE ($5,250 at 60–63), none in a SEP. All contributions pre-tax. Federal tax saved is income tax only, for married filing jointly with the 20% QBI deduction, with business profit as the only income and the standard deduction. Your tax preparer can confirm your exact figure.
Business owners
What it costs to start and to run
The business usually pays the plan’s own fees and can deduct them. Small employers with staff can also claim tax credits that cover most of the first three years (see tax creditspage 8).
Money: typical price ranges
What providers charged in 2026. The bar runs from the low end to the high end of what we found.
Time: how long until the plan is up and running
Typical start-to-finish time on a stretched scale, so short and long jobs both fit. The pale bar is the SIMPLE IRA’s 60-day sign-up window for staff.
Other costs
Fund fees
From about 0.03% a year for many index funds to 1% or more for others, taken from everyone’s balance.
From about 0.03% a year for many index funds to 1% or more for others, taken from everyone’s balance.
Adviser fees
If an adviser helps pick and watch the funds, a median of about 0.5%–0.65% of plan assets a year for plans under $1 million.
If an adviser helps pick and watch the funds, a median of about 0.5%–0.65% of plan assets a year for plans under $1 million.
Missed filings
A late Form 5500-EZ can cost $250 a day, up to $150,000. The IRS relief program cuts that to $500 a return, at most $1,500 per plan.
A late Form 5500-EZ can cost $250 a day, up to $150,000. The IRS relief program cuts that to $500 a return, at most $1,500 per plan.
Business owners
The yearly workload
A provider (a brokerage, payroll company or plan administrator) does most of the technical work. These are the jobs that stay with you as the owner, shown for a business that runs on the calendar year.
Your calendar, plan by plan
Your time each year
IRS and DOL time estimates for each plan’s yearly filings and notices; payroll deposits and reviews are extra
Who does what in a 401(k)
You
- Deposit what you withhold from pay within days of each payday
- Send payroll and new-hire data
- Hand out required notices
- Pick the provider and review funds and fees: you’re a fiduciary
- Sign Form 5500
Provider
- Keeps the accounts
- Runs fairness tests
- Prepares Form 5500 and notices
- Handles loans, withdrawals and rollovers
Your CPA
- Figures your own contribution and deduction
- Claims the startup credits (Form 8881)
- Checks W-2 and payroll reporting
With employees
Tax credits pay much of the startup cost
A credit cuts your tax dollar for dollar. A business with 100 or fewer employees that starts a new plan can claim three of them on Form 8881.
$5,000
Startup credit, each year for 3 years
Pays back 100% of setup and running costs (50% with 51–100 employees). The cap is $250 per eligible employee who isn’t highly paid: at least $500, at most $5,000.
$500
Auto-enrollment credit, each year for 3 years
For adding automatic enrollment to a new or existing 401(k) or SIMPLE IRA plan.
$1,000
Contribution credit, per employee, for 5 years
Covers business contributions for each employee paid $110,000 or less in 2026: up to $1,000 in years 1–2, then $750, $500 and $250. Full with 50 or fewer employees, phasing out by 100. Not for defined benefit plans.
Example: a shop with 12 employees starts a 401(k)
Plan fees each year, and how much the startup credit covers
Contribution credit, per employee
Most you can claim for each employee, by plan year
Year 1 for the example shop, if the business puts in at least $1,000 for each of the 12 and none earns over $110,000
$3,000startup credit
+
$500auto-enrollment
+
$12,000contribution credit
=
$15,500in tax credits
Fine print
- You need at least one employee who isn’t highly paid, so plans that cover only owners (a Solo 401(k), or a SEP that covers just you) don’t qualify.
- Costs and contributions the startup and contribution credits cover can’t also be deducted, so a credit’s real value is its amount less the tax that deduction would have saved. Credits reduce tax you owe; unused amounts can carry to other years.
- Your employees can’t have been covered by another plan of yours in the 3 years before.
Business owners
Words to know, and what to do next
- Contribution or deferral
- Money you put into a plan from your pay. “Elective deferral” is the formal name.
- Employer match
- Money the employer adds based on what you save, such as 50¢ per $1 on up to 6% of pay.
- Profit sharing
- A contribution the business decides on each year and splits among eligible employees.
- Vesting
- The schedule for when employer money becomes fully yours.
- Catch-up contribution
- Extra savings allowed from age 50, and more at ages 60–63.
- Safe harbor 401(k)
- A design where the employer puts in a set amount and skips the yearly fairness tests.
- Fairness (nondiscrimination) tests
- Yearly checks that a plan doesn’t favor highly paid people: in 2026, those paid over $160,000 the year before, or owning more than 5%.
- Fiduciary
- Anyone who runs the plan or picks its funds and must act only for the participants. As the employer, that includes you.
- Form 5500
- A plan’s annual report to the IRS and Department of Labor. Form 5500-EZ is the short version for one-person plans.
- Rollover
- Moving money from one plan or IRA to another without paying tax.
- Required minimum distribution
- The amount you must withdraw each year once you reach 73 or 75.
- Actuary
- A credentialed specialist who sets how much a cash balance or other defined benefit plan needs each year.
Next steps
- Count who would be eligible, using the rules for each planpage 4.
- Estimate this year’s profit, or your W-2 pay from the business; it sets the deduction (see the calculatorpage 5).
- Check the setup deadline for the plan you choose.
- Get quotes from two or three providers and compare them with the typical costspage 6.
- Have your tax preparer confirm the deduction, any credits and the return each goes on.
- Give your staff the employee sheet when the plan starts.
This guide gives general information using 2026 figures. It is not tax, legal or investment advice for your situation, using it doesn’t create a client relationship, and it is not an IRS publication. Provider prices come from published fee pages checked September 30, 2026, and change often. Owner-hour and setup-time figures are planning estimates. Each figure’s source, with link, quote and date checked, is listed in the separate source ledger.
- IRS Notice 2025-67 (2026 limits); Rev. Proc. 2025-32 (brackets, QBI threshold)
- IRS Pub. 560, Form 8881 instructions, IRS plan pages; Internal Revenue Code and regulations
- DOL Form 5500 instructions; PBGC; SSA; Georgetown CRI (state auto-IRAs)
- Published fee pages, checked Sept. 30, 2026: Fidelity, Schwab, E*TRADE, Vanguard/Ascensus, Ubiquity, My Solo 401k, Nabers Group, IRA Financial, Rocket Dollar, Gusto, Human Interest, ADP, Betterment, Vestwell, Employee Fiduciary, Principal
- Cash balance and audit fees: Emparion, Steidle, JULY, Dedicated Defined Benefit; Pepper, DHJJ, Dufek. Fund and adviser fees: ICI, Employee Fiduciary