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The MyRA is as simple as it gets. The minimum deposit is $25 per employee, and you or your employees can contribute as little as $5 per pay period. There is no cost to employers. They don’t administer employee accounts, nor do they contribute to them or match employee contributions. The government provides all the materials you need to explain how it works to employees.

The accounts are Roth IRA’s, which means contributions are made with after-tax dollars. The money earns a guaranteed return equal to that of the “G” fund in the government’s Thrift Savings Plan. Savers can contribute up to $5,500 per year or $6,500 if they are age 50 or older. Money contributed can be withdrawn at any point without taxes or penalties. Participants can accumulate no more than $15,000. After that, the money must be rolled over into a privately held Roth IRA.

2. SEP-IRA’s

Simplified Employee Pension Plan.

• No government filings.
• Contributions only from employer.
• For sole proprietors, partnerships, corporations

The employer makes all contributions for Simplified Employee Pension plans or SEPs. The maximum contribution can’t exceed the lesser of $53,000 for the 2015 and 2016 tax years or 25% of the employee’s net compensation.

For self-employed individuals, the IRS defines compensation as your net earnings from self-employment, reduced by one-half of your self-employment tax and by your entire SEP-IRA contribution.

Besides the employer employees’ SEP-IRA contribution, they can save in their IRAs up to $5,500 for the 2015 and 2016 tax years, or $6,500 if age 50 or older. If you are an owner-only business, you can save both ways – a great way to maximize your retirement savings while lowering your taxes.

Sole proprietors, partnerships, and corporations, including S corporations, can set up SEP-IRAs. A small company may be eligible for a $500 tax credit for three years to offset the startup costs. You don’t have to contribute every year.

3. SIMPLE IRA

Savings Incentive Match Plan for Employees.

• Employers must contribute annually
• Employees can contribute $12,500
• $3,000 catch-up contributions allowed
• For small companies

The Savings Incentive Match Plan for Employees of Small Employers, or SIMPLE IRA, could be a great choice if you want to contribute to a retirement plan and you have a small company – fewer than 100 employees.

• An employee may choose to contribute, but an employer must contribute annually.
• An employee can contribute up to $12,500 in 2015 and 2016. Those 50 and over can make a catch-up contribution of $3,000 in 2015 and 2016.

The employer can participate in one of two ways. He or she can choose to match each employees’ contributions dollar-for-dollar, up to 3% of the employee’s compensation. If the employer has a lousy year, the matching contributions can be reduced to less than 3%, but the contribution must be at least 1%, and this haircut is only allowed in two out of five years.

Alternatively, an employer can make a 2% contribution of total compensation for each eligible employee up to a cap in 2015 and 2016 of $265,000. Under this option, employees don’t have to contribute anything, but they can – up to employee contribution limits stated above.

4. SIMPLE 401(k)

Savings Incentive Match Plan for Employees.

• Similar setup as SIMPLE IRA
• Can allow loans from the plan

The SIMPLE IRA has a first cousin, the SIMPLE 401(k). The contribution rules are similar. In both cases, the plans aren’t subject to non-discrimination income tests that apply to regular 401(k) plans, and employees are fully vested immediately for all contributions.

The most significant difference is that SIMPLE 401(k) can allow loans from the plan, an option some small business owners may find attractive.

5. Solo 401(k) Plans

• Contributions can’t exceed $53,000
• For self-employed, owner-only businesses and partnerships
• Must file paperwork once assets reach $250,000

The best thing about one-participant or Solo 401(k) is that you can maximize contributions if your income is too low to allow you to get most of the SEP-IRA plan.  For example, you have to earn a lot to contribute the maximum $53,000 to a SEP-IRA; conversely, you can earn less and still contribute more to a 401(k) plan.

The Solo 401(k) works like this:

As both employer and employee, a business owner can contribute both:

• Elective deferrals up to 100% of the “earned income” up to the annual contribution limit or for those over 50 up to $24,000.
• 25% of compensation, which the IRS defines as net earnings from self-employment minus one-half of your self-employment tax, minus the contributions you make to your retirement plan.

Self-employed individuals and owner-only businesses and partnerships are eligible. Owner’s spouses also may participate.

6. Defined Benefit Plans

Fixed benefits tied to tenure and salary.

• Generous contribution limits
• Enrolled actuary determines funding levels
• Must file annually with government
• Employer assumes all investment risk

Of all the small business retirement plans available, the old-fashioned defined benefit retirement plan may be the best for ensuring a comfortable old age.

Defined benefit plans provide a fixed benefit generally tied to tenure and salary for an employee’s retirement. The employer bears all investment risk. These plans are especially advantageous for high-income professionals who can afford the costs to both set up and administer them. 

The most likely participants are doctors, dentists, lawyers, accountants, and consultants in partnerships, family businesses, or other small entities. It can also be an attractive option for a couple when one is a high earner with a good corporate retirement plan, and the other is self-employed and makes an income that the couple doesn’t need. Retired professionals earning money as consultants also find them an attractive way to shelter income or as part of an estate-planning strategy.