How do employers choose and set up a workplace retirement plan?
June 9, 2025 | 3 minute read
Choosing a new plan or enhancing the one you already have
Whether you’ve never offered a retirement plan before or are looking to enhance the one you already have, there are a number of factors to consider when searching for the right option for your business.
Here are the three most common types of workplace retirement plans offered by small businesses. For more details, check out an in-depth comparison of each or try our Retirement Account Selector Tool.
401(k) — A 401(k) can be a good choice for many small businesses and self-employed individuals. They are easy to set up online and all have contribution limits three times higher than those of traditional IRAs.1
- Streamlined, three-step online setup makes establishing a 401(k) quick and simple
- Online administration that's straightforward and easy to manage helps reduce your administrative burden
- Employer, employees or both can contribute
- High contribution limits and additional catch-up contributions for participants age 50+2
- Contributions you make are generally tax-deductible by your business3
- A menu of funds and model portfolios takes the guesswork out of investing4,5
SIMPLE IRA—A Savings Incentive Match Plan for Employees (SIMPLE) IRA is a cost-effective, low-maintenance plan for businesses that don't have a ton of employees. You make contributions for your employees, who can also contribute through salary deferrals.
- Easy online application and administration
- Employers must contribute; employee contribution is optional
- Contributions you make are generally tax-deductible by your business6
- Participants can contribute significantly more than they could with a traditional IRA7
SEP IRA — A Simplified Employee Pension (SEP) IRA is an inexpensive and easy-to-establish plan for individuals and small businesses that don't have a ton of employees.
- Easy online application and administration
- Only employers can contribute
- Contribute nearly 10x more than to a traditional IRA8
- Contributions you make are generally tax-deductible by your business9
To learn more about which retirement plan is right for you, visit Workplace Benefits for Business Owners and Entrepreneurs.
How to set up a workplace retirement plan
While establishing a workplace retirement plan may seem daunting, it's actually not a difficult process.
Here's how it usually works:
Bank of America Workplace Benefits™ for small business owners and entrepreneurs
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How can employers boost employee engagement in workplace retirement plans?
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1 www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000
2 See note 1, above.
3 For more information visit the IRS website. You should talk to your legal and/or tax advisors before making any financial decisions.
4 Plan- and participant-level administrative and recordkeeping services for Merrill Small Business 401(k) plans are provided by Ascensus. Investment advisory and fiduciary services are provided by Morningstar Investment Management LLC, a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. Morningstar Investment Management LLC is a provider of investment management solutions, including investment advisory and retirement plan services. Educational call center support will be provided by Ascensus. Bank of America Corporation, Ascensus and Morningstar Investment Management LLC are not affiliated.
5 Morningstar Investment Management LLC selects the investments and is responsible for the ongoing monitoring and maintenance of the investments and model portfolios. Merrill is responsible for ongoing product management and vendor oversight, as well as trading and custodial services of plan assets and monthly transaction statements.
6 See note 3, above.
7 Contribution and compensation limits are subject to a cost-of-living adjustment annually pursuant to the Internal Revenue Code. Contribution and compensation limits for subsequent years may vary.
8 As the business owner, your contributions to your SEP IRA account and deductions for such contributions may vary based on your net earnings and self-employment tax deduction. Please consult your tax advisor.
9 See note 3, above.
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