Small Business 401(k)

Attract and retain talented employees by offering an affordable, easy‑to‑manage 401(k) — designed for the needs of small businesses.

SEP IRA

Benefit from the flexibility to contribute as your cash flow allows, while offering employees the potential for tax-deferred growth and contribution limits nearly 10 times higher than a Traditional IRA.

SIMPLE IRA

Have 100 or fewer employees and predictable cash flow? Take advantage of easy plan-administration, while offering potential tax advantages to your business and employees.
 

Plan features

  401(k) SEP IRA SIMPLE IRA
Employer contributions generally tax deductible by business
Small Business 401(k)
Yes, employer contributions are generally tax deductible.
SEP IRA
Yes, employer contributions are generally tax deductible.
SIMPLE IRA
Yes, employer contributions are generally tax deductible.
Plan expenses generally tax deductible by business
Small Business 401(k)
Yes, plan expenses are generally tax deductible. If this is your first 401(k) plan and you have 100 or fewer employees, you may also benefit from a tax credit of up to $500 for the first 3 years.Footnote 1
SEP IRA
Yes, plan expenses are generally tax deductible. Merrill Edge does not charge setup or administrative fees for SEP IRAs. You may also benefit from a tax credit of up to $500 for the first 3 years.Footnote 1
SIMPLE IRA
Yes, plan expenses are generally tax deductible. Merrill Edge does not charge setup or administrative fees for SIMPLE IRAs. You may also benefit from a tax credit of up to $500 for the first 3 years.Footnote 1
Employer contributions are flexible
Small Business 401(k)
Yes. Businesses have the flexibility to contribute to employee accounts through optional or required contributions depending on the plan chosen.
SEP IRA
Yes. Employers have the flexibility to decide whether or not to contribute in any given year as well as contribution amount.
SIMPLE IRA
Employers must contribute but may adjust the contribution amount annually.
Employees contribute  
Small Business 401(k)
Yes, employees have the option to fund their accounts through salary deferrals.
SEP IRA
No, contributions are made only by the business.
SIMPLE IRA
Yes, employees have the option to fund accounts through salary deferrals.
Roth (after-tax salary deferrals) option    
Small Business 401(k)
Yes, a Roth option is available for employee contributions.
SEP IRA
No, a Roth option is not available.
SIMPLE IRA
No, a Roth option is not available.
Loans and withdrawals are available    
Small Business 401(k)
Yes, loans and withdrawals are available if you choose these features in your plan. Participants may incur tax penalties if certain conditions aren't met.Footnote 2
SEP IRA
No, loans are not available. Withdrawals taken before age 59½ — with certain exceptions — are subject to an additional 10% early withdrawal penalty.
SIMPLE IRA
No, loans are not available. Withdrawals taken before age 59½ — with certain exceptions — are subject to an additional 10% early withdrawal penalty (25% if taken within the first 2 years of participation).
Preferred Rewards benefits  
Small Business 401(k)
No, 401(k) accounts are not currently included in the Preferred Rewards program.
SEP IRA
Yes. If you are a sole proprietor, your SEP IRA balances count toward your Preferred Rewards status.
SIMPLE IRA
Yes. If you are a sole proprietor, your SIMPLE IRA balances count toward your Preferred Rewards status.
Investment choices Menu of funds and model portfolios Full range of invest­ments Full range of invest­ments
Small Business 401(k)
Funds and model portfolios — selected and managed by Morningstar Investment Management LLC — help take the guesswork out of investing.Footnote 3
SEP IRA
You and your employees can access a full range of investment choices, including stocks, bonds, options, ETFs and well-known mutual funds.
SIMPLE IRA
You and your employees can access a full range of investment choices, including stocks, bonds, options, ETFs and well-known mutual funds.
Additional IRS filing required Some­times    
Small Business 401(k)
Employers with eligible W-2 employees are generally required to file IRS Form 5500 annually. A signature-ready Form 5500 will be prepared for employer review, at no additional cost.
SEP IRA
No. IRS reporting is not required.
SIMPLE IRA
No. IRS reporting is not required, but notification of employer contributions must be made to employees annually.
Contribution limits for employees under age 50Footnote 4 $54,000 $54,000 $12,500
Small Business 401(k)
The maximum combined business and employee annual contribution is the lesser of 100% of compensation or $54,000 for 2017 ($53,000 for 2016) per participating employee.
SEP IRA
For all participating employees, contributions are limited to the lesser of $54,000 for 2017 ($53,000 for 2016) or 25% of eligible compensation (20% of self-employed net earnings).
SIMPLE IRA
Employees, including business owners, can defer up to $12,500 of salary annually. Businesses must contribute a flat 2% of compensation to all participants, or a dollar-for-dollar match of employee contributions up to 3% of compensation. If needed, the cap may be reduced as low as 1% for any 2 years during a 5-year period. Combined employee and employer contributions cannot exceed $28,000.
Contribution limits for employees age 50 or olderFootnote 4 $60,000 $54,000 $15,500
Small Business 401(k)
For employees age 50 and older, the maximum combined business and employee annual contribution is the lesser of 100% of compensation or $60,000 for 2017 ($59,000 for 2016) per participating employee.
SEP IRA
For all participating employees, employer contributions are limited to the lesser of $54,000 for 2017 ($53,000 for 2016) or 25% of eligible compensation (20% of self-employed net earnings). Catch-up contributions are not permitted.
SIMPLE IRA
Employees age 50 and older, including business owners, can defer up to $15,500 of salary annually. Businesses must contribute a flat 2% of compensation to all participants, or a dollar-for-dollar match of employee contributions up to 3% of compensation. If needed, the cap may be reduced as low as 1% for any 2 years during a 5-year period. Combined employee and employer contributions cannot exceed $31,000.

Need help or have questions?

Call 855.667.9451855.667.9451
Mon-Fri 9 a.m. - 8 p.m. ET to speak with a Financial Solutions Advisor

Important disclosures

Footnote 2 Please consider the advantages and disadvantages of taking a loan before initiating one. For more information, read "Know the facts about loans and withdrawals" (PDF).
Footnote 3 Morningstar Investment Management LLC selects the investments and is responsible for the ongoing monitoring and maintenance of the investments and model portfolios. Merrill Lynch is responsible for ongoing product management and vendor oversight, as well as trading and custodial services of plan assets and monthly transaction statements.
Footnote 4 Contribution limits are subject to a cost-of-living adjustment annually pursuant to the Internal Revenue Code. Contribution limits for subsequent years may vary.
You are eligible to enroll in the Preferred Rewards program if you have an active, eligible Bank of America® personal checking account and maintain a three-month average combined balance in your qualifying Bank of America deposit accounts and/or your qualifying Merrill Edge® and Merrill Lynch® investment accounts of at least $20,000 for the Gold tier, $50,000 for the Platinum tier, or $100,000 for the Platinum Honors tier. The combined balance is calculated based on your average daily balance for a three calendar month period. SafeBalance Banking® accounts do not count toward the account or balance requirements, and do not receive the fee waivers and other benefits of the program. Certain benefits are also available without enrolling in Preferred Rewards if you satisfy balance and other requirements. For details on employee qualification requirements, please call Employee Financial Services or visit the Bank of America intranet site. Merrill Lynch Wealth Management clients with greater than $250,000 in assets with Bank of America and Merrill Lynch are eligible for additional banking benefits. Please speak with your Merrill Lynch financial advisor for details.
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