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401(k) Comparison Chart

Figuring out the nuances of various 401k plans is a challenge.  Here's a quick side-by-side comparison of the different features of various types of 401k plans.  While this list is certainly not all-inclusive, it will give you a good idea of the differences, pros and cons of the most common and popular types of retirement plans.
 
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401(k)
Profit-Sharing
SEP IRA
SIMPLE 401(k)
SIMPLE IRA
IRA
Who can Establish?
Corporations (including Sub S), Self employed individuals, Sole Props, Partnerships, Nonprofit Orgs, Governmentals before 5/5/86 grandfathered.
Corporations (including Sub S), Self employed individuals, Sole Props, Partnerships, Nonprofit Orgs, Governmentals.
Corporations (including Sub S), Self employed individuals, Sole Props, Partnerships, Nonprofit Orgs, Governmentals.
Corporations (including Sub S), Self employed individuals, Sole Props, Partnerships, Nonprofit Orgs, no more than 100 employees last calendar year with more than $5,000 compensation.
Corporations (including Sub S), Self employed individuals, Sole Props, Partnerships, Nonprofit Orgs, no more than 100 employees last calendar year with more than $5,000 compensation.
Individual taxpayers under 70 1/2 by the end of the year with earned income.
How is the plan set up?
Adoption of Plan Document and Trust Agreement (if trusteed).  May use prototype.
Adoption of Plan Document and Trust Agreement (if trusteed).  May use prototype.
Adoption of IRS form 5305-SEP or a prototype plan document.
Adoption of plan or trust agreement or prototype.  Must be exclusive plan of the employer for the eligible employees.
Adoption of IRS Form 5304-SIMPLE (nondesignated financial institution).  Must be exclusive plan of the employer for the eligible employees.
Custodial agreement with a financial institution or an annuity contract.
When must the plan be established?
By end of first plan year (12/31 for calendar year plans).  No employee deferrals allowed until plan document is signed.
By end of first plan year (12/31 for calendar year plans).
Tax filing due date (including extensions).
By Oct. 1.   Must be maintained on a calendar year basis.
By Oct. 1.  Must be maintained on a calendar year basis.
April 15th following tax year of individuals regular contributions.
When must the contributions be made?
Employee deferrals are made on a salary reduction basis or deferral of a cash bonus.  Employer contributions must be made by tax due date plus extensions.
By tax filing deadline plus extensions.
By tax filing deadline plus extensions.
Employee deferrals are made on a salary reduction basis or deferral of a cash bonus.  Employer contributions must be made by tax due date plus extensions.
Employee deferrals are made on a salary reduction basis or deferral of a cash bonus.  Employer contributions must be made by tax due date plus extensions.
April 15th following tax year of individuals regular contributions.
How are contributions / benefits determined?
Contributions are determined annually by the employer and employees.  Special nondiscriminations tests apply.
Contributions are determined annually by the employer.  Usually allocated on pro rata compensation but can be integrated with Social Security.  Age based formulas also allowed.
Contributions are determined annually by the employer.  Usually allocated on pro rata compensation.  Social Security integration allowed if using a prototype plan document.
Contributions are determined annually by the employer and employees.
Contributions are determined annually by the employer and employees.
Contributions are determined annually by the individual.  If an active participant in an employer sponsored retirement plan and has AGI of less than $60,000 (single) or $85,000 (joint) some or all of the contribution may be deductible.
What are participant eligibility requirements?
Generally, age 21 and 1 year of service at 1,000 hours.
Generally, age 21 and 1 year of service at 1,000 hours.
3 years of service out of last 5 years.  21 years of age and earns at least $450 per year (as indexed).
Generally, age 21 and 1 year of service at 1,000 hours.
At least $5,000 in compensation (as indexed) in any 2 preceeding years and in current year.
Earned income up to level of contribution and under age 70 1/2.
What is the employee contribution limit?
100% of compensation up to the applicable limit ($15,000 in 2006 then indexed in $500 increments).  The combined maximum employee limit is the lesser of 100% of compensation or $44,000 and includes deferrals, employer contributions and forfeitures.
Generally not allowed.
Employee contributions are not allowed.  The maximum amount that can be allocated to an employees account is the lesser of 25% of compensation or $44,000.
100% of compensation up to the applicable limit.  Salary reduction limit is $10,000 in 2006 then indexed in $500 increments.
100% of compensation up to the applicable limit.  Salary reduction limit is $10,000 in 2006 then indexed in $500 increments.
Contribution limit $4,000 in 2006-2007 and $5,000 in 2008 then indexed in $500 increments, combined with ROTH IRA contributions.
What is the employer contribution limit?
Maximum employer limit is 25% of eligible participants compensation exclusive of employee elective deferrals for deductibility purposes.
The maximum allocation amount to a participant's account is the lesser of 100% of compensation or $44,000 for 2006 (indexed).  Maximum employer limit is 25% of eligible participant's compensation for deductibility purposes.
Employer limit is up to 25% of eligible participant's compensation for deductibility purposes.
Employer must contribute 100% of deferrals up to 3% of compensation or a 2% nonelective contribution.  Matching contributions cannot be varied.  No other contributions are allowed.
Employer must contribute 100% of deferrals up to 3% of compensation or a 2% nonelective contribution.  Matching contributions may vary.  No other contributions are allowed.
Not applicable.
What is the employee contribution catch-up limit?
Individuals age 50 or older can make additional contributions of up to $5,000 in 2006, then indexed in $500 increments.
Not allowed, unless 401(k) alective deferral feauture is added.
Not allowed.
Individuals age 50 or older can make additional contributions equal to $2,500 in 2006, then indexed in $500 increments.
Individuals age 50 or older can make additional contributions equal to $2,500 in 2006, then indexed in $500 increments.
Individuals age 50 or older can make additional contributions of up to $1,000 in 2006, (not indexed).
Annual contributions required?
No
No
No
Yes
Yes
No
Plan advantage






Plan disadvantage






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