SEP IRA vs. SIMPLE IRA vs. 401(k) for Washington small businesses
By Dustin Metcalf, CRPC® · Updated October 7, 2026
2026 comparison
| SEP IRA | SIMPLE IRA | 401(k) | |
|---|---|---|---|
| Who funds it | Employer only | Employees, plus required employer contribution | Employees, plus optional or required employer contributions |
| Employee savings limit | None (no employee deferrals) | $17,000 (+$4,000 age 50+); higher limits for some small employers | $24,500 (+$8,000 age 50+; $11,250 ages 60–63) |
| Employer contribution | Up to 25% of pay; same % for all eligible employees; can vary year to year | Required: 3% match (can drop to 1% in 2 of 5 years) or 2% for everyone | Flexible: none, match, profit sharing, or safe harbor |
| Max per person (2026) | $72,000 | Employee deferral + employer contribution | $72,000 total, plus catch-up |
| Business size | Any | 100 or fewer employees | Any |
| Setup deadline | Up to your business tax filing deadline, including extensions | Generally by October 1 of the year it starts | Generally by year-end; some plans can be adopted until the tax filing deadline |
| Administration | Very light | Light | Most involved; often handled by a provider |
| Startup tax credits | Yes | Yes | Yes |
SEP IRA: best when the owner wants to save and the team is small
A SEP is the simplest plan to run. The business decides each year whether to contribute and how much, up to 25% of each eligible employee's pay. The catch is that whatever percentage you give yourself, you give every eligible employee, and employees can't add their own payroll savings.
SIMPLE IRA: a step up from Washington Saves
Employees save from their paychecks like Washington Saves, but with a much higher limit, and the business contributes too. Costs are usually low. It must generally be the only plan the business offers, and the required employer contribution is a fixed cost to plan for.
401(k): the most flexible
A 401(k) offers the highest employee limit and the most design choices, including profit sharing that can help owners reach the $72,000 limit. It has more administration and fiduciary responsibility, which providers and pooled employer plans can reduce. Most new 401(k)s must auto-enroll employees, unless the business has 10 or fewer employees or is under three years old.
Which is right for you?
It depends on your profit, how many employees you have, how much you want to save personally, and how much you want to contribute for your team. We can run the numbers for your business, including the tax credits, and show you each option side by side with Washington Saves. How the tax credits work.
Frequently asked questions
Which retirement plan is best for a small business in Washington?
There's no single best plan. A SEP IRA suits owners who want simplicity and flexible employer-only contributions, a SIMPLE IRA suits businesses that want employee savings with low cost, and a 401(k) suits businesses that want the highest limits and design flexibility. All three exempt you from Washington Saves.
Does a SIMPLE IRA exempt me from Washington Saves?
Yes. A SIMPLE IRA counts as a qualified retirement plan for the exemption, as do SEP IRAs and 401(k)s.
Can I still set up a SEP IRA for 2026?
Generally yes. A SEP IRA can be set up and funded for a tax year up to your business's tax filing deadline, including extensions.
What is the 2026 SIMPLE IRA contribution limit?
$17,000, plus a $4,000 catch-up at age 50 or older. Some smaller employers can use a higher limit of $18,100 under SECURE 2.0.
Want this worked out for your business?
Book a free intro call with Dustin. We'll compare Washington Saves with a plan of your own, including estimated cost after tax credits and what you could save for yourself. If Washington Saves is the best fit, we'll tell you.