Simplified Employee Pension (SEP) is another retirement benefit option that is suited for small businesses. The benefits of this plan are that it doesn’t require IRS approval, more money can be deposited each year (up to $30,000 or 15% of annual earnings), the amount of money contributed can vary year to year based on the employee’s preferences, contributions in most cases are pre-tax dollars, and planning materials are provided free of cost on the IRS’s website. (IRS Form 5305). The requirements for this retirement plan is that: (1) the employee is 21 years old, (2) the program must be offered to all employees who have worked 3 of the last 5 years, and that (3) the employee has to have earned at least $374 (1992).

The 401(k)/profit sharing retirement plans are also a common retirement benefit plan that can be offered to employees. Here contributions are made with pre-tax dollars, which reduces the employee’s tax liability for the year. It is a flexible plan with low account maintenance costs. The benefit of this program is that the contributions made by the employee are pre-tax dollars, and the contributions made by the employer are tax deductible as a business expense. Anther benefit of this program is that employees can get loans against their 401(k) if they need money for a vacation, to make home improvements, or to pay medical bills. Employers find this retirement option appealing because it is the most inexpensive type of retirement plan to operate. While there are many benefits to this program there are limitations and tests that can be applied to the program that limits the amount of deferrals that can be made, and that also set minimum contribution limits.

Other retirement planning programs that can be offered to employees include stock ownership plans and money purchase plans. In the stock ownership plan employees are given stocks as a bonus each year they work. When they retire they can sell the stocks to get money to live on. In the money purchase plan, employers simply make annual monetary contributions to an employee account that is to be used as a retirement tool.