Nudge your boss to start 401(k) plan
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Below is a sampling of retirement vehicles (not an exhaustive list) that small businesses might consider offering, as well as their features and contribution limits.

Small business retirement plans

Plan name Features Contribution limits Traditional or Roth 401(k) plan Plans vary in complexity and cost. Except for safe harbor 401(k) plans and SIMPLE 401(k) plans (both of which require an employer to match contributions), traditional 401(k) plans must meet certain complex nondiscrimination tests. All 401(k) plans are subject to stringent reporting, disclosure and other requirements. With traditional 401(k) plans, employees get a tax break upfront (salary deferrals are not included in taxable income), whereas with Roth plans employees take tax-free distributions at the back end (but are taxed upfront). Employee contributions (elective deferrals) are limited to the lesser of 100 percent of compensation or $15,000 in 2006; $15,500 in 2007. Additional $5,000 catch-up contribution is allowed for those over 50. Employers can add as much as $44,000 ($45,000 in 2007), though the total maximum ceiling for employer/employee contributions is $49,000. SIMPLE IRA As is true with SIMPLE 401(k) plans, this one is appropriate for firms with fewer than 100 employees. Elective deferral limit is lesser of 100 percent of compensation or $10,000 in 2006; $10,500 in 2007. An additional $2,500 catch-up contribution is allowed for those over 50. Employer must make a match. It can match up to 3 percent of compensation (with lesser amounts allowed in no more than two of five years), or employer could contribute a straight 2 percent of compensation for all employees whether or not they contribute to the plan. Self-employed 401(k) plan Good plan for sole proprietors who want to maximize both the employee and employer contribution amounts. Business can only employ the owner and a spouse. These are the same as that of the regular 401(k) plan, with the sole proprietor able to make both elective deferrals plus the employer contribution up to a limit of $49,000. SEP IRA (Simplified Employee Pensions) Good for one person as well as small operations. Easy to set up, with little paperwork required. Does not have to be funded every year. Employer can use this to make sizable contributions to his own and to employees' accounts. The tax filing deadline is less restrictive for SEPs than for most other retirement plans. Contribution limit is 25 percent of compensation, up to $44,000 per account in 2006 ($45,000 in 2007). Only employers can fund these plans.

Longtime financial journalist Barbara Mlotek Whelehan earned a certificate of specialization in financial planning. If you have a comment or suggestion about this column, write to Boomer Bucks.