Plan Types

The IRS permits you to make selections in design including: employee deferral amounts, employer contributions, eligibility, vesting, and loans. A traditional 401k and SIMPLE both permit pre-tax employee and employer contributions and tax-deferred earnings; however there are specific features that differentiate each. Our team will detail plan elements to help you with the best fit before implementation.

 Traditional 401kSafe Harbor 401kSIMPLE
Maximum Business SizeNo limitNo limit100 employees
Individual Contribution Limit$18,000 in 2017$18,000 in 2017$12,500 in 2017
Catch-up Contributions$6,000 in 2017$6,000 in 2017$3,000 in 2017
Discrimination Testing (ADP)YesNoNo
Mandatory Employer ContributionNoYes, 4% match or 3% for all employeesYes, 1% to 3% of salary for match or 2% for all employees
Loans PermittedYesYesNo
Hardship WithdrawalsYesYesYes, Special Purpose Distributions
VestingUp to 6 years for match, up to 7 years for Profit SharingImmediate for required match or non-electiveImmediate
Eligibility Max1 year, age 21, 1,000 hours max1 year, age 21, 1,000 hours maxEmployees earning $5000 in any preceding 2 years & expected to earn $5000 in current
Rollovers To/From Other Retirement AccountsYesYesTo: only from another SIMPLE IRA
From: after 2 years to avoid penalty
Flexible Employer Contributions up to 25% of PayYes, not to exceed
$54,000 in 2017
Yes, not to exceed
$54,000 in 2017
No
Flexibility To Favor Owners/OfficersYesYesNo
IRS Tax Form 5500YesYesNo
Establishment DeadlineBy the last day of the plan yearAny date between January 1 and October 1; may not have an effective date that is before the date Any date between January 1 and October 1; up to year end for a new business

Highly Compensated Employees, those whose salary is above $120,000 in 2017, are subject to a second contribution limit under a traditional 401k. This limit is calculated via the average deferral percentage (ADP) testing.

Source of chart data: IRS.gov.