Retirement Savings

Smaller businesses have affordable retirement plan options.


To attract top workers, many businesses offer 401(k) plans for their employees. But those plans can be expensive and complicated to operate. Smaller businesses have two good alternatives. Simple IRAs and Simplified Employee pensions are both employer-sponsored plans that function more like regular Individual Retirement Accounts and can be managed at no cost by Cashmere Valley Bank.


Simple IRA

A Savings Investment Match Plan for Employees is a tax-deferred retirement plan designed for small businesses with 100 or fewer employees and self-employed owners. Non-profit organizations also often offer Simple IRAs.

  • Employers and employees both contribute to the plan
  • Contact your local branch for contribution limitations
  • Employee contributions are pre-tax and deducted from their paychecks
  • Employers are generally required to match employee contributions up to 3% of the employee’s compensation
  • Employer contributions are tax-deductible, while employee contributions and interest or dividend earnings are tax-deferred
  • As with a regular IRA, employees can choose from a variety of investment options
  • Employees may start withdrawing funds penalty-free at age 59 ½

SEP Plans

SEPs - or Simplified Employee Pensions - allow small business owners to contribute to Individual Retirement Accounts (IRAs) for themselves and their employees. The accounts are known as SEP-IRAs and have similar rules as Traditional IRAs for investments, distributions and rollovers.

  • Contributions are made by employers only
  • Employees qualify for SEP Plans if they have reached the age of 21, have worked for the same employer for 3 of the past 5 years and have earned at least $600 in the previous year
  • Contact your local branch for contribution limitations
  • Employer contributions are tax deductible up to 25% of all plan participants’ compensation
  • For employees, SEP Plan participation may affect the deduction they can take for any contribution to their own personal Traditional IRA
  • As with a personal IRA, employees may choose from a range of investment options
  • Employees may begin withdrawing funds penalty-free at age 59½. Earlier withdrawals are possible if employees meet an early distribution penalty exception.

Additional Resources

For detailed information about Retirement Plans for small business, consult a financial or tax professional or visit www.irs.gov. The following IRS publications may also provide assistance: