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  • Writer's pictureSamantha Diggs

SIMPLE IRA or 401(k)?

Updated: Mar 11, 2022


Whether you are considering establishing a new 401(k) plan or converting your existing SEP or SIMPLE IRA plan, we'd be happy to discuss the advantages of a 401(k) and the potential for both cost savings and tax benefits for your clients. While SEP and SIMPLE IRAs offer small business retirement plan solutions, the benefits of a 401(k) are clear:

  • More flexibility

  • Higher contribution limits for all

  • Opportunity to maximize contributions

  • Roth contributions

  • Both employee and employer can contribute

  • SEP/SIMPLE IRAs can have high withdrawal penalties.

  • Loan availability allows employees access to their assets prior to retirement


Due to IRS rules, timing is critical when considering replacing a SEP or SIMPLE IRA with a 401(k) plan. These rules include:

  • You CANNOT have a SIMPLE Plan and a 401(k) Plan in effect during the same calendar year.

  • SIMPLE IRA plans must be maintained for a whole calendar year. Once started, you must continue your SIMPLE IRA plan for the entire calendar year, funding all contributions promised in the employee notice.

  • For a SIMPLE IRA to be terminated at year-end, participant notices must be sent to participants at least 60 days in advance (by November 2).






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