Small Business Retirement Plans

Why 401(k) Complexity Costs So Much

A 401(k) works well, but the maintenance is expensive and time-consuming. Here's what eats up your budget each year:

Annual Form 5500 Filing. The IRS and Department of Labor require a government filing every single year. Miss the deadline? Penalties start at $250 per day. Preparing and filing this costs $1,000–$2,000 annually.

Nondiscrimination Testing. Your plan must prove owners and executives don't contribute more than regular employees. When the test fails (which happens), you refund contributions or add employer money. This testing runs $1,500–$3,000 per year.

Top-Heavy Testing. If owners or key employees own more than 60% of the plan, you're required to contribute for everyone else. That's real money out of your pocket.

Third-Party Administrator (TPA) Fees. You hire a specialist to handle testing, compliance, and government filings. A TPA charges $2,000 to $5,000+ per year, on top of investment management fees.

Audit Requirements. Plans with 100+ participants need an independent audit every year. That's $5,000–$20,000 annually.

Here's the frustrating part: none of this overhead helps your employees save. It doesn't go into their accounts. For a 25-person business, that's a lot of money disappearing into administration.

Choose a SIMPLE IRA: Retirement Benefits Without Complexity

A SIMPLE IRA (Savings Incentive Match Plan for Employees) gives you everything a 401(k) offers but cuts out the unnecessary red tape. It's built for small businesses.

A SIMPLE IRA means you won't file Form 5500s with the government year after year. Your plan is automatically compliant. No nondiscrimination testing. No top-heavy testing. No hiring a third-party administrator. No annual audits, whether you have 5 employees or 99.

Your employees own every dollar you contribute on day one. A 401(k) uses vesting schedules: "You own this after 3 years." A SIMPLE IRA is immediate. Your match is theirs the moment it hits their account. That transparency builds loyalty in a way delayed vesting never will.

The Money Talk: What This Actually Saves You

Let's work with real numbers. Take a Central Pennsylvania company with 25 employees averaging $55,000 in pay:

A typical small business owner saves around $9,650 every year by making the switch.

Over ten years, that's $96,500. Money that stays in your business. Money you can reinvest in growth. Money you can put toward more generous matching contributions for your team.

How to Get Started: Two Paths

Path A: You Already Have a 401(k)

The transition is straightforward. You terminate the 401(k) by December 31, and the SIMPLE IRA launches January 1. You can't run both in the same year, but that keeps things clean.

The biggest challenge is making sure your employees understand the change and trust that their money rolls over correctly. PAC Financial handles all of that: we talk to your team, coordinate with your payroll system, process the rollovers, and set up the SIMPLE IRA. You don't manage the project. We do.

Path B: You've Never Offered a Retirement Plan

If you're starting from scratch, a SIMPLE IRA is the easiest path. Paperwork is minimal. You launch it anytime from January 1 through October 1. No waiting, no red tape. Just a simple setup your team will appreciate.

2026 Contribution Limits

Employee Contributions: Up to $17,000 per year

• Catch-up age 50-59 and 63+: Additional $4,000
• Catch-up age 60-63 (SECURE 2.0 + OBBBA): Additional $5,250

Employer Match Options:

• Dollar-for-dollar match up to 3% of each employee's compensation, OR
• 2% nonelective contribution for all eligible employees regardless of whether they contribute

All employer contributions are fully tax-deductible.

Note: Contribution limits are subject to annual IRS cost-of-living adjustments. Consult your tax professional for the most current figures.

Why Work With PAC Financial

We're a Central Pennsylvania firm. When you call, you get the same person. Not a national call center.

We design a plan that fits your business, your budget, and your employee needs. If you're switching from a 401(k), we manage the termination, talk to your team, coordinate the rollovers, and launch the SIMPLE IRA for you. You don't manage the transition. We do.

Questions come up. New employees arrive. Contribution limits change each year. We're here when you need us, not just once a year at enrollment.

We know the Harrisburg business landscape and work with Central PA companies regularly. We understand what works here.

Ready to Stop Throwing Money Away?

If you're tired of expensive 401(k) costs or want to offer your team a retirement benefit without the overhead, PAC Financial handles the work. You focus on running your business. We manage the plan.

Let's talk through whether a SIMPLE IRA makes sense for you.

Give PAC Financial a call — or Schedule a SIMPLE IRA Consultation.

Or visit our Rollover to PAC Financial page to see what the transition looks like.

Model estimates are based on hypothetical assumptions: 25 employees, average salary $55,000, 3% employer match, 21% corporate tax rate. Actual results will vary based on individual circumstances, plan design, and market performance. This illustration is provided for educational purposes only and does not constitute a guarantee of future results.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.

Securities and Investment Advisory Services offered through Osaic Wealth, Inc., Member FINRA/SIPC and Registered Investment Advisor. Insurance services offered through PAC Financial, which is not affiliated with Osaic Wealth, Inc.

This communication is strictly intended for individuals residing in the states of CO, DE, FL, GA, MD, MI, NC, NJ, NY, PA, SC, VA. No offers may be made or accepted from any resident outside the specific state(s) referenced.