Introduction

With increased state retirement plan mandates and shifting federal rules, small business owners face many choices for establishing tax-advantaged retirement plans, including deadlines that are either fast approaching or already here, depending on what state you are located in. This article answers common questions about the most relevant plan types—including eligibility, contributions, deadlines, and tax incentives—so you can make informed decisions.

What Are the Basic Individual Retirement Account Options?

Traditional IRA

• Who: Any individual with earned income
• Annual contribution limit (2026): $7,500; catch-up (age 50+): +$1,100
• Employer involvement: None (unless payroll-deduction IRA). Note—some states are setting up an IRA as the default option for small businesses and their employees due to the state mandate
• Deadline: Tax filing deadline of the following year (e.g., April 15, 2027 for 2026 contributions)
• Tax treatment: Traditional IRA contributions may be deductible (subject to income and plan participation rules)

Roth IRA

• Who: Any individual who meets income eligibility thresholds
• Annual contribution limit (2026): Same as Traditional ($7,500 + $1,100 catch-up)
• Employer involvement: None. Note—some states are setting up a Roth IRA as the default option for small businesses and their employees due to the state mandate
• Deadline: Tax filing deadline next year
• Tax treatment: After-tax contributions; qualified withdrawals are tax-free
• Notes: Income limits may phase out eligibility

What Small-Business Retirement Plans Are Best for Business Owners With Employees?

SEP IRA (Simplified Employee Pension)

• Who: Any business owner (including self-employed) and eligible employees
• Employee eligibility: Must meet plan's age/service criteria (e.g., age 21, 3 of last 5 years of service and compensation minimum)
• Contribution limits: Employer up to 25% of compensation per employee or $72,000 (2026), whichever is lower
• Employee contributions: None by employee; employer only
• Deadline: Employer contributions may be made up to the business tax filing date (including extensions) for the year
• Tax credits: Small employer tax credit up to $5,000 per year for 3 years for start-up costs

SIMPLE IRA (Savings Incentive Match Plan for Employees)

• Who: Employers with 100 or fewer employees
• Contribution limits (2026): Employee elective deferrals up to $17,000; age 50+ catch-up $4,000
• Employer requirement: Either match employee contributions (up to 3%) or make a 2% non-elective contribution for all eligible employees
• Deadline: Employee deferrals by Dec 31 or soon after payroll withholding; employer contributions by business tax filing deadline (including extensions)
• Tax credits: Eligible startup cost tax credit (up to $5,000/year for 3 years)

401(k) Plan (Traditional / Safe Harbor)

• Who: Any business of any size (including solo if no employees qualifies as Solo 401(k))
• Contribution limits (2026): Employee deferrals up to $24,500, catch-up $8,000; total contribution (employee + employer) up to $72,000 (plus catch-up)
• Safe harbor option: Bypass complex nondiscrimination testing by making mandatory employer contributions; helpful for small businesses recruiting talent
• Deadline: Employer contributions generally must be made by the business's tax filing deadline (varies by plan type)
• Tax credits: Startup cost credit up to $5,000/year for 3 years

What About Plans Designed for High Contribution Amounts or Long-Term Benefits?

Solo 401(k)

• Who: Business owners with no employees (other than spouse)
• Contribution limits: Combines employee deferral ($24,500 + $8,000 catch-up in 2026) with employer profit-sharing (up to ~25% compensation), often allowing higher total savings amounts
• Features: Some plans allow Roth contributions and loans
• Deadline: Must establish plan by Dec 31 of the year to contribute for that year; employer contributions by tax return due date
• Tax credits: Eligible for startup tax credit noted above

Defined Benefit Pension Plan

• Who: Business owners seeking guaranteed retirement income and high savings
• Contribution limit/benefit: Not capped like defined contribution plans; annual benefit limits (e.g., $290,000 in 2026)
• Employer role: Employer funds the plan and bears actuarial risk
• Deadline: Contributions must be timely based on actuarial and plan year rules; employer contribution by tax return due date including extension
• Tax credits: Startup cost tax credit available if qualifying as noted above

Are There Deadlines and Required Notices to Know?

• Solo or traditional 401(k): Employer contributions generally must be made by the business tax filing deadline (including extensions)
• SIMPLE IRA: Employee deferral deposit deadlines are strict (generally within payroll cycles, and by Dec 31); employer contributions by tax-filing deadline
• SEP IRA: Set up by the tax filing deadline (including extensions), and contributions can often be made up until that deadline
• IRA/Roth IRA: Contributions for a year may be made up to the following year's tax filing deadline

What Tax Credits or Incentives Exist?

Small Employer Startup Tax Credit

• Up to $5,000 per year for 3 years for ordinary and necessary costs of starting a SEP, SIMPLE IRA, or qualified plan (like a 401(k))

Saver's Credit (Individual)

• Eligible participants (low- to moderate-income) who contribute to an IRA or employer plan may qualify for the Saver's Credit (income limits vary by year)

Table 1: Retirement Plan Comparison at a Glance

Conclusion

Choosing the right plan depends on your business size, desired contributions, administrative capacity, and tax planning goals. SEP and SIMPLE IRAs offer simplicity and tax benefits for small employers, while 401(k) and defined benefit plans provide higher savings potential and flexibility. Small employer tax credits and IRS deadline provisions can further influence which plan suits your practice and your clients best.

Helpful resources:

• Tax credit calculator for your business: julyservices.com/secure-act2-tax-credit-calculator
• State-by-state mandated retirement plans: humaninterest.com/learn/articles/what-is-a-state-sponsored-retirement-plan

DISCLOSURE: Securities and Investment Advisory Services are offered through Osaic Wealth, Inc., member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth. Osaic Wealth does not offer tax or legal advice. Contribution limits, deadlines, and tax credit figures reflect 2026 amounts and are subject to change. This material is for general informational purposes only and is not intended to provide specific tax or legal advice. We suggest that you discuss retirement plan selection and setup with a qualified tax professional, third-party administrator, or ERISA attorney before establishing a plan.