Business owner retirement plans
The Small Business Retirement Plan That Fits Your Payroll, Not the Brochure
Cash balance, safe harbor 401(k), SEP-IRA, SIMPLE or CalSavers. Each lets a San Diego owner put away a different amount, and what separates them is who else is on the payroll.
For 2026 a 401(k) lets an employee defer $24,500, and everything added to one person's account in a year, employer and employee money together, is capped at $72,000, or 100% of pay if that is less, before catch-up contributions. A cash balance plan is measured differently and can take an owner further, but only when the census supports it. Which of those a business can use depends on ages, headcount, tenure and the pay spread. Revenue is the variable owners assume is doing the work, and it is not.
Is this the page you need?
You are probably in the right place if you are thinking:
- “I have a SIMPLE IRA and I'm not sure it is still the right plan for the business.”
- “My CPA says there is a bigger deduction available, but I don't know what it costs me in staff contributions.”
- “I keep hearing cash balance plan. I can't tell whether it fits a business my size.”
- “CalSavers showed up and I don't know whether a plan of my own is worth the trouble.”
This page is part of the San Diego Business Owner Blueprint, the wider plan that coordinates retirement plan design with tax, protection and exit.
The Blueprint covers retirement plan design as one of six areas, inthe San Diego Business Owner Blueprint. This page is the one for owners who are choosing a plan now.
Six plans, side by side
What each plan lets an owner put away, and what it asks of the business
The limits are the easy part. The right-hand columns are where the choice gets made.
| Plan | 2026 limit that applies | What it asks of the business | Where it tends to fit |
|---|---|---|---|
| SEP-IRA | Employer contribution of the lesser of 25% of pay or $72,000 per employee. No employee deferrals or catch-up. | Employer money only. Eligible staff are part of the plan. | An owner with few or no staff who wants a simple setup. |
| SIMPLE IRA | Employee deferral of $17,000 for most plans, $18,100 for certain employers. | A required employer match or contribution. | A small business that wants low administration and can live with the lower ceiling. |
| Safe harbor 401(k) | Deferral of $24,500, plus $8,000 at 50 and over or $11,250 at ages 60 to 63. Total additions of $72,000 or 100% of pay, whichever is less. | A required employer contribution: a match, or 3% of pay to every eligible employee. Fully vested when made. | An owner who wants the full deferral without a testing clawback. |
| Traditional 401(k) with profit sharing | Same limits as above. | Annual nondiscrimination testing, and top-heavy rules when owners hold most of the balance. | A business with steady participation across the staff and a tolerance for testing. |
| Cash balance plan | Annual benefit limit of $290,000, or 100% of the participant's highest three-year average pay if less. The contribution is set by an actuary. | A required contribution every year, an actuary, and a plan that carries funding obligations until it is terminated. | High, steady income and an owner well ahead of the staff in age. |
| CalSavers | IRA limit of $7,500. | Registering and passing payroll deductions through. Employees are enrolled automatically. | The state baseline, not a design for owner contributions. |
Sources for these figures are listed at the bottom of the page.
Ask before quote
Your employee census picks the plan, and revenue has almost no say
Two businesses with the same top line and the same headcount can need different plans. Four facts in the payroll file explain why.
The gap between your age and your staff's
A wide gap is the fact pattern for designs that allocate on years to retirement. A narrow one is not, because your senior people need most of the same funding you do.
Who is on the payroll and for how long
Headcount, tenure and turnover decide who is eligible and who ever vests. A business that hired six people this year funds a different plan than one with twelve people past year three.
The pay spread
One person far above everyone else is a different testing problem than four people near the same line. The 2026 compensation limit of $360,000 caps how much of anyone's pay counts.
W-2 or 1099
Only W-2 employees are covered. A 1099 who should have been a W-2 is a plan problem later, so it is a question for your CPA or attorney before it is a question for the plan document.
The worked version of this, with two hypothetical San Diego firms side by side, is inhow the employee census picks the plan. It is worth reading before the vendor call, because the vendor will ask for the same file.
What the safe harbor choice costs once the startup credits are counted, and the year they run out, is worked through for one firm insafe harbor 401(k) cost for a 14-person business.
How the decision runs
Five steps, in this order
Each one needs the one before it. Most plan decisions go wrong by starting at the third.
Step 1: Pull the census
One row per person: date of birth, hire date, W-2 pay, ownership and family relationship, hours for part-timers. Your payroll provider can export most of it.
Step 2: Price two designs against it
Have a third-party administrator run at least two candidate designs on the real file, not a sample. The same census can support two defensible answers depending on what you are optimizing for.
Step 3: Set the household floor
Decide what the household needs to live on before any deduction. At a San Diego cost of living, the amount a plan locks up each year may be exactly what the household relies on.
Step 4: Check it against the exit horizon
A plan funded for five years against a sale that closes in year two is a conflict. Say the timeline out loud before the plan document is signed.
Step 5: Check the calendar
Some designs carry notice windows and adoption cutoffs that can take the decision off the table for a year. Your administrator has the current-year dates.
None of this changes anything you have in place today. It decides whether the work you do this month can still become a plan for the coming year.
The part owners skip
The plan you pick also changes what a buyer sees
Retirement plan design and exit timing usually get decided in the wrong order.
A buyer reads the plan contributions line by line. The share that went to you can be argued back into earnings when the plan records separate it clearly, and the share that went to employees is harder to add back. How that split is negotiated, and what to document in the years before a sale, is the subject ofwhether your retirement plan contributions lower what a buyer will pay.
The other half of the same argument is that the business should not be the only plan. A single-asset retirement strategy has no diversification, whichwhy your business shouldn't be your only retirement plan takes apart from the retirement side.
One more point on CalSavers, since owners ask. California requires employers with one or more employees to provide access to a qualified retirement program or certify an exemption, and a business that sponsors its own plan can file for that exemption. CalSavers is an automatic enrollment IRA, so the $7,500 IRA limit is its ceiling. It solves a mandate. It does not solve an owner contribution problem.
Not ready to book yet
Start with the checklist
The first of its six sections is retirement plan structure: whether your current setup is right for your business. The other five cover tax, key person and buy-sell protection, personal wealth, valuation awareness and exit readiness.
This is educational content, not individualized advice.
Request the San Diego Business Owner Financial Checklist
Walk through the six areas the Blueprint covers and see where your plan is solid and where there may be a gap. Retirement plan structure is section one.
Request the complimentary San Diego Business Owner Financial Checklist and it arrives by email.
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That did not send. Please try again, or emailBStevens@BAS-Financial.comand we will send the San Diego Business Owner Financial Checklist over.
Questions owners ask about choosing a plan
How much can I put away as the owner of a small business?
It depends on the plan, and on what else is already going in. For 2026 the employee deferral limit in a 401(k) is $24,500, with an extra $8,000 at age 50 and over and $11,250 at ages 60 to 63. Employer and employee money together are capped at $72,000 per person, or 100% of pay if that is less, before catch-up contributions. A defined benefit plan is measured differently: the annual benefit limit for 2026 is $290,000, or 100% of the participant's average pay in the highest three years if that is less, and the contribution that funds it is set by an actuary.
Is a cash balance plan worth it for a small business?
Sometimes. It fits best when income is high and steady, the owner is well ahead of the staff in age, and the business can carry a required contribution every year. It is a poor fit when income swings or when the owner may sell within a few years. A cash balance plan is a defined benefit plan, so it has funding requirements under the Internal Revenue Code and an actuary behind it. Whether it fits is a census question first and an income question second.
Can I move from a SIMPLE IRA to a 401(k)?
Owners do it, and the usual reason is the ceiling. The 2026 deferral limit for most SIMPLE plans is $17,000, against $24,500 in a 401(k). The timing rules on the SIMPLE side are specific, so confirm the sequence with your administrator before you end the SIMPLE.
Do I have to offer CalSavers if I already have a 401(k)?
No. California requires employers with one or more employees to provide access to a qualified retirement program or certify an exemption with CalSavers, and an employer that already sponsors a plan can file for the exemption. CalSavers is an automatic enrollment IRA, so for 2026 it is limited by the IRA limit of $7,500. It does not do what a custom plan does for an owner.
Does a safe harbor 401(k) mean I have to fund it every year?
For the plan year it covers, yes. A safe harbor design requires an employer contribution: either a match, or 3% of pay to every eligible employee whether or not they defer. The contribution is fully vested when made. That swap from a discretionary contribution to a required one is the actual decision, and the dollar cost is worked through for one firm in the safe harbor post linked above.
Can I just pick a plan and let my CPA tell me if it works?
The order matters. Your CPA can tell you whether the deduction is usable against your return. The census is what tells you which design a business can carry and still pass testing, which is why the administrator runs it before the plan is chosen, not after.
Before you book
More for business owners weighing a plan
Bring the payroll file. We'll read it with you.
A 30-minute Blueprint review. Bradly Stevens walks through what your census supports and what it rules out, and coordinates the design question with your CPA and a third-party administrator so one set of numbers drives all of it. The fee is discussed during a complimentary review.
Book my intro callA 30-minute call. No document gathering beforehand, and no obligation afterwards.
Sources for the figures on this page
Limits are for the 2026 plan year. The IRS normally publishes the next year's limits in the fall, and this page is updated when it does.
2026 limits quoted on this page
- IRS, Notice 2025-67, “2026 Amounts Relating to Retirement Plans and IRAs”: elective deferrals $24,500 (section 402(g)); catch-up $8,000 at age 50 and over and $11,250 at ages 60 to 63 (section 414(v)); defined contribution limit $72,000 (section 415(c)(1)(A)); defined benefit annual benefit limit $290,000 (section 415(b)(1)(A)); compensation limit $360,000 (section 401(a)(17)); SIMPLE deferral limit $17,000, and $18,100 for certain employers (section 408(p)(2)(E)).
- IRS, “401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500,” IR-2025-111, November 13, 2025.
- IRS, “SEP contribution limits”: the lesser of 25% of the employee's compensation or $72,000 for 2026; “Elective salary deferrals and catch-up contributions are not permitted in SEP plans.”
Plan mechanics
- U.S. Department of Labor and IRS, Publication 4222, 401(k) Plans for Small Businesses (November 2020 revision): the safe harbor nonelective contribution is 3% of compensation to each eligible employee.
- IRS Employee Plans, cash balance plans chapter: “A cash balance pension plan is a defined benefit pension plan,” the employer assumes any risk of loss to the trust fund, and the plan has funding requirements under IRC 412.
- California State Treasurer, CalSavers: employers with one or more employees must provide access to a qualified retirement program or certify an exemption, effective January 1, 2026; CalSavers is an automatic enrollment IRA.