The Small Business Guide to Retirement Plan Options in Pennsylvania
As a small business owner, you understand the immense value of your employees. Providing them with robust retirement savings options is a powerful way to invest in their future and strengthen your company’s long-term success. We know that navigating the complexities of retirement plans can feel overwhelming. We’re dedicated to simplifying this process. With over 25 years of experience, our advisors are committed to helping businesses like yours find the best retirement plan options, even if you’re a single-person operation looking to expand.
Types of Retirement Plans
Retirement plans allow employers to help employees save for retirement through payroll deductions. Depending on the size of your small business, you can create different plans for yourself and your employees. Here are the most common options:
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401(k) Plans
401(k) comes from the related Internal Revenue Code (IRC) section. These plans are employer-sponsored plans where you, as an employer, get to match your employees’ contributions. Your employees can elect to contribute a percentage of their earnings to the investment account. They will also choose which specific investments will be held within their account, but you, as the employer, will provide the investment options. These investments can include stocks, bonds, and mutual funds.
Many 401(k) plans are available for small businesses in Pennsylvania, offering flexibility for you and your employees. You can choose between traditional and Roth options. Traditional plans allow for pre-tax contributions and tax-deferred growth, with taxes paid upon distribution. Conversely, Roth plans utilize after-tax contributions but allow for tax-free withdrawals and growth. Our advisors can help you assess your company’s and employees’ financial situations to determine whether a traditional or Roth 401(k) plan best aligns with your long-term tax strategy and overall financial goals.
Beyond the traditional options, Safe Harbor 401(k)s offer advantages for small businesses. They are exempt from certain complex IRS rules and often simpler to administer. Our team is well-versed in these nuances and can guide you through the setup process, minimizing your administrative burden. Solo 401(k)s, on the other hand, are ideal for business owners with no employees.
The 2025 contribution limit for all types of 401(k) accounts is $23,500, with a catch-up contribution limit of $7,500 for those 50 or older. The combined employee and employer limit is $70,000 annually.
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Simplified Employee Pension (SEP) IRA
An SEP plan is a retirement account suitable for businesses of any size. You can be self-employed or a large enterprise. These plans can be a traditional or Roth IRA, but only you, as an employer, can make contributions. The employee will still own and control the account.
SEP plans can be an excellent solution for businesses with fluctuating income, as annual contributions can be flexible. However, you must contribute equally to all qualified employees. For instance, suppose your business experiences seasonal sales where some periods offer larger profits than others. You can make larger contributions during the good times while reducing the amount during the bad.
Contributions are limited to the lesser of 25% of the employee’s compensation or the annual contribution limit, which for 2025 is $70,000 per participant. Catch-up contributions and elective salary deferrals are not allowed for SEP plans. Keep in mind that you don’t need to contribute annually.
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Savings Incentive Match Plan for Employees (SIMPLE)
SIMPLE plans are retirement accounts where employees can make salary reduction contributions, while employers contribute through matching or non-elective contributions. The plans are only for businesses with up to 100 employees, who each made at least $5,000 in compensation the previous year. Most SIMPLE accounts are IRAs, though employers can also adopt the SIMPLE plan as part of a 401(k) plan.
The 2025 salary reduction contribution limit is $16,500. For those 50 or older, the catch-up contribution limit is generally $3,500, though some plans may allow a higher amount for specific age ranges (e.g., ages 60-63). Account holders can make tax-free rollovers to non-SIMPLE plans two years from the date the employee first participated in the SIMPLE IRA plan.
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403(b) Plan or Tax-Sheltered Annuity (TSA) Plan
TSA plans are designed for churches or charitable, tax-exempt employers. These plans work similarly to 401(k) plans for for-profit organizations. Employers and employees can make contributions. In a traditional account, these contributions are not subject to federal or state income tax until they’re distributed. However, a 403(b) plan can also be a Roth account, with tax-free distributions and earnings.
The employee contribution limit for 2025 is $23,500, while the limit for combined employer and employee contributions is $70,000. Catch-up contributions for people 50 and older can be up to $7,500. Depending on the plan, the limit for those 60 to 63 is increased to $11,250.
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Defined Benefit Plans
Most retirement plans are defined contribution plans, where the contribution amount is set, but no amount is guaranteed in retirement. Conversely, defined benefit plans set a specific amount employees will receive when they retire. These are sometimes called pension plans.
Defined benefit plans are almost entirely funded by employer contributions. Employers typically need the help of an actuary professional to create this type of plan and determine the contributions required to meet the promised benefits. For 2025, the annual benefit cannot exceed $280,000 or 100% of the person’s average compensation for their highest three consecutive years, whichever is less.
Why Trust Fort Pitt Capital Group
For over 25 years, we have been helping individuals and business owners manage their accounts and provide investment advisory services to help them achieve their financial goals. Our diverse client base includes individuals seeking to improve their personal finances and closely held businesses, corporations, public entities, and labor unions.
We create comprehensive retirement plans offering protection and peace of mind for business owners and their employees. Because we are a fiduciary , we are legally bound to put our clients’ best interests first.
Ready to Build a More Secure Future for Your Business and Employees?
At Fort Pitt Capital Group, we understand the complexities and concerns of choosing and managing retirement plans. With decades of experience, our dedicated team acts as a fiduciary, meaning we are legally bound to put your interests first.
We specialize in designing and managing comprehensive retirement solutions for Pennsylvania businesses of all sizes, from 401(k)s to defined benefit plans and everything in between. We’d like to simplify the process, address your pain points, and ensure you provide a retirement plan that will help you attract and retain top talent.
Unlock the best retirement plan for your small business. Schedule a no-obligation discussion with an advisor today and take the first step towards a more secure financial future!
