Probably a simpler one than you think. Most owners put this off because they picture a 401(k) with an administrator, an audit, and a binder. That is one option out of several, and it is not the one most small businesses need. A plan can be as light as a form and a payroll entry, or as built-out as you want it. Below are the four plans small employers in Pennsylvania and Maryland actually choose between, what each one asks of you, and how to tell which is yours.
These are not better and worse versions of the same thing. Each one solves a different problem, and the right question is which problem is yours.
| Plan | What it is | Who it fits | What to watch |
|---|---|---|---|
| SIMPLE IRA | A payroll-deduction plan for smaller employers. Your team can contribute from their own pay, and you contribute too, either as a match for those who participate or a set percentage for everyone eligible. | Businesses under 100 employees that want a real plan without real paperwork. The most common landing spot for a small team. | Contribution limits are lower than a 401(k), and the employer contribution is required, not optional. Budget for it as a standing cost. |
| SEP IRA | An employer-funded plan. Employees do not contribute from their paychecks. You decide each year what percentage of pay to put in, and that same percentage applies to everyone eligible, including you. | Owners with no employees, or very few. High capacity, almost no administration, and you can change the percentage or skip a year when business is slow. | The uniform-percentage rule is the catch. Once you have staff, funding yourself well means funding everyone at the same rate, which gets expensive quickly. |
| 401(k) | The full plan. Employees defer from their pay, you can match, and you control the design: vesting schedules, Roth options, profit sharing, and eligibility rules. | Businesses that want the highest contribution room, want a recruiting-grade benefit, or have enough people that plan design starts to matter. | It carries the most administration and cost: annual filings and compliance testing. A safe harbor design trades a required employer contribution for skipping that testing. |
| Solo 401(k) | A 401(k) for an owner with no employees other than a spouse. You contribute as the employee and again as the employer, which is what makes the total so high. | Self-employed people and owner-only businesses with strong income and no staff. Often the highest-capacity option available to one person. | It stops being a solo plan the day you hire a full-time employee who qualifies. Know that before you build a savings plan around it. |
Contribution limits change every year, so we do not print them on a web page where they can quietly go stale. Ask us for the current year's numbers and we will give you figures you can actually rely on. Plan choice also carries tax consequences, including the startup credits SECURE 2.0 created for new plans. That is education, not tax advice, and your CPA is the right person to confirm what you qualify for. We work the plan design alongside them.
You do not need to understand every plan to choose well. You need to answer three things honestly, and the field narrows fast.
If the answer is mostly you, a SEP IRA or a solo 401(k) will usually win on capacity and simplicity. If the answer is you and a team you want to keep, the plans that let employees contribute their own money start to matter more than raw limits.
Headcount drives cost and eligibility. It also decides whether a vesting schedule is worth having. If turnover is high, a plan that rewards people for staying does two jobs at once.
This is the question owners skip and then regret. A plan you resent running is a plan that gets neglected. Be honest about your appetite for filings and deadlines, and we will size the plan to the truth.
Here is how that plays out. Say a plumbing shop in Adams County has an owner and six employees. The owner wants to put away as much as possible and keep two good techs from leaving. A SEP IRA would mean funding all six at the same percentage the owner takes, which prices the good version out of reach. A SIMPLE IRA lets the techs contribute their own money, holds the owner's required contribution to a predictable number, and takes about an afternoon to set up. That is usually the answer for that shop. Change one fact, say the owner is alone with no staff, and the answer flips to a solo 401(k) without hesitation.
Same business, same owner, different plan, because the question was never which plan is best. It was which problem are we solving.
Maryland already requires most established employers to give their people a way to save. Pennsylvania's Keystone Saves program is phasing in behind it. In both states, sponsoring your own qualifying plan is normally the alternative to enrolling in the state program.
That is worth knowing before a letter arrives, because it changes the question from whether to do this into which plan you would rather have. A plan you chose on purpose almost always beats the one you were assigned by a deadline.
The full breakdown of both programs, and what else small employers owe by law, sits on the Employee Benefits page. If you already offer a plan, this probably does not touch you, and we will tell you that in about five minutes rather than selling you something.
We work through headcount, payroll, turnover, and what you can commit to every year without flinching.
We weigh plan type and employer contribution against cost and administration, with your CPA in the conversation on the tax side.
Eligibility, vesting and the match get written down together, so you and your team know the rules going in.
We handle setup and payroll coordination, and we sit with your employees to explain what they are signing up for.
Plans get set once and left for a decade while the business changes around them. We look at yours with you before that happens.
It depends on three things: how many people you employ, whether you are saving mostly for yourself or for the whole team, and how much administration you are willing to carry. Owner-only businesses usually land on a solo 401(k) or a SEP IRA. Small teams that want something simple usually land on a SIMPLE IRA. Businesses that want higher limits and design control usually land on a 401(k). We walk the trade-offs with you, and the tax questions go to your CPA.
A SEP IRA is funded entirely by the employer, and every eligible employee gets the same percentage of pay that the owner takes. A SIMPLE IRA lets employees contribute from their own paychecks and requires you to contribute as well, either as a match or as a set percentage for everyone eligible. A SEP is often the simplest choice for an owner with no staff. A SIMPLE IRA is usually the lighter choice once you have employees.
Yes. A solo 401(k) is built for an owner with no employees other than a spouse. Because you contribute both as the employee and as the employer, it allows a high total contribution at low administrative cost. The rule to know going in: the day you hire a full-time employee who qualifies, it stops being a solo plan and has to be run as a regular 401(k).
It depends on the plan. A SEP IRA requires you to fund the same percentage of pay for every eligible employee. A SIMPLE IRA requires either a match for those who participate or a smaller contribution for everyone eligible. A traditional 401(k) requires no employer contribution at all, though most add a match to encourage participation, and a safe harbor design uses a required contribution to skip annual testing.
Generally yes. Both programs are aimed at employers who offer no retirement plan at all, so sponsoring your own qualifying plan is normally the alternative to enrolling in the state program. This is education rather than legal advice, and we will confirm what applies to your specific business before you file anything.
Usually, yes, and often for reasons that have nothing to do with switching. Plans get set up once and then run untouched for a decade while the business changes around them. We look at what you are paying, what your people actually use, and whether the design still matches your headcount. Sometimes the answer is that it is fine. That is a real answer and it costs you nothing to hear.
The plan you chose on purpose beats the one a deadline chose for you.
One conversation. Current year's numbers. Your CPA stays in the loop.
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