Updated April 2026 · Florida Plan Finder · Licensed Florida Health Insurance Producer

SEP-IRA vs. SIMPLE IRA for Florida Small Businesses: Which Is Right for You? (2026)

Florida small business owners with employees face a key retirement plan decision: the SEP-IRA and SIMPLE IRA are both straightforward to establish and administer, but they serve different situations. The wrong choice can either leave money on the table (choosing a plan with lower contribution limits when you could save more) or create unexpected costs (mandatory employer contributions for all employees). Here's a direct comparison for 2026.

SEP-IRA: Best for Solo Operators and Variable Income

The SEP-IRA allows employer contributions only — employees do not make elective deferrals. 2026 limit: lesser of $70,000 or 25% of compensation (W-2 wages for employees; net self-employment income × 20% for sole proprietors). If you have employees, you must contribute the same percentage for all eligible employees as you do for yourself — a SEP with 5 employees where you contribute 15% costs 15% of each employee's salary in contributions. No employee deferral. Deadline: tax return due date (with extensions — up to October 15 for a sole proprietor). No Roth option.

SIMPLE IRA: Best for Businesses with Regular Employee Participation

The SIMPLE IRA allows both employee deferrals and employer contributions. 2026 employee limit: $16,500 ($19,500 with catch-up at 50+). Employer must contribute either: 3% match of employee contributions (flexible — can be reduced to 1% in 2 of 5 years), OR 2% non-elective for all eligible employees. SIMPLE setup deadline: October 1 of the year the plan is to be effective. Employees benefit from both their own contributions and the employer match. The mandatory employer contribution applies to all eligible employees, even those who don't contribute themselves (under the 2% non-elective option).

Contribution Comparison at Different Income Levels

Solo operator at $100,000 net income: SEP-IRA: $20,000 (20% of net SE income); SIMPLE IRA: $16,500 employee deferral only (no employer match to yourself as sole employee in most structures). SEP wins for solo operators. Business owner paying themselves $80,000 W-2 salary with 3 employees averaging $40,000: SEP at 15%: owner puts in $12,000 for self + $6,000 × 3 = $18,000 for employees = $30,000 total. SIMPLE: owner contributes $16,500 deferral + 3% match ($2,400) for self = $18,900, but must match 3% for employees on their contributions (up to 3% of $40,000 = $1,200/employee if they contribute). SIMPLE may be cheaper if employees don't all contribute.

Administrative Differences

SEP-IRA: zero plan documents required (IRS Form 5305-SEP is the plan); each participant opens their own IRA at a brokerage; no annual Form 5500 for most SEPs. Simplest possible retirement plan. SIMPLE IRA: requires an adoption agreement (IRS Form 5304-SIMPLE or 5305-SIMPLE); must notify employees annually; 2-year withdrawal restriction applies to SIMPLE funds. More paperwork than SEP but still far simpler than a 401(k).

When to Choose 401(k) Over Either

Both SEP and SIMPLE lose to a Solo 401(k) for self-employed individuals with no employees — Solo 401(k) allows both employee deferrals and employer contributions, achieving the $70,000 limit at lower income levels. For businesses with employees exceeding the SIMPLE's employer match budget, a traditional 401(k) with a profit-sharing plan may be more flexible. Large employers (50+ employees) often benefit from a 401(k) design that maximizes owner contributions while minimizing employee contribution requirements (through safe harbor designs).