SIMPLE IRA vs 401(k): Which Is Right for Your Business?
A SIMPLE IRA is easier and cheaper to administer for small businesses but has lower contribution limits. A 401(k) allows higher contributions and more flexibility but has higher administrative costs. The choice depends on business size and goals.
Key differences
| Feature | SIMPLE IRA | 401(k) |
|---|---|---|
| 2026 employee limit | $17,000 | $24,500 |
| 2026 catch-up (50+) | $4,000 | $8,000 |
| Employer contribution | 3% match or 2% non-elective | Flexible; safe harbor options |
| Admin cost | Low | Higher |
| Eligibility | ≤100 employees | Any size |
| Loan option | No | Yes (plan permitting) |
When a SIMPLE IRA makes sense
A SIMPLE IRA is designed for small businesses with 100 or fewer employees. It has minimal administrative burden and no annual filing requirement for the plan itself. The employer must either match employee contributions up to 3% of compensation or make a 2% non-elective contribution for all eligible employees. This makes it predictable and inexpensive.
When a 401(k) makes sense
A 401(k) allows much higher contributions — $24,500 vs $17,000 for 2026 — plus larger catch-up contributions. It also allows loans, Roth contributions, and more flexible employer matching. If the business can absorb the administrative cost and employees want to save more, a 401(k) is usually the stronger option.
Frequently asked questions
Can a business have both a SIMPLE IRA and a 401(k)?
Generally not in the same year for the same employees. You typically must choose one type of plan.
What is the SIMPLE IRA employer match rule?
The employer must either match employee contributions dollar-for-dollar up to 3% of compensation, or contribute 2% of each eligible employee's compensation regardless of whether they contribute.
Sources
Gleefund explains general retirement-account concepts and provides estimates. It does not provide financial, tax, or legal advice. See our disclaimer and methodology. Check the current IRS rules before acting.
Figures current as of 2026-09-25. Found an error? Contact us.