Business Retirement Plan Options for 2026: What Employers Need to Know
As 2026 approaches, businesses continue to evaluate retirement plan strategies that balance employee benefits, tax advantages, and administrative complexity. The retirement plan landscape largely splits into two categories: defined contribution (DC) plans and defined benefit (DB) plans. Each offers unique advantages depending on a company’s goals, workforce demographics, and cash-flow stability.
Defined Contribution Plans
Defined contribution plans remain the most widely adopted option for small and mid-sized businesses. These plans specify how much employers and employees may contribute annually, while the employee bears investment risk. Key DC plan types for 2026 include:
401(k) and Safe Harbor 401(k) Plans
Allow employees to defer salary on a pre-tax or Roth basis.
Employers may contribute through matching or profit-sharing.
Safe Harbor 401(k) plans automatically satisfy certain nondiscrimination tests, making them popular for owner-employees seeking maximum contributions.
Solo 401(k) Plans
Ideal for businesses with no employees other than the owner and spouse.
Allow high annual contributions through combined employee deferral and employer profit-sharing, making them attractive for high-income sole proprietors.
SIMPLE IRA Plans
Designed for companies with 100 or fewer employees.
Lower cost and easier administration than a 401(k), though contribution limits are also lower.
SEP IRA Plans
Offer flexible employer-only contributions.
Attractive for businesses with fluctuating income or those seeking lower administrative overhead.
Defined Benefit Plans
Defined benefit plans guarantee a specific retirement benefit, shifting investment and longevity risk to the employer. Though more complex, they can provide significantly higher deductible contributions—particularly beneficial for profitable businesses with owners nearing retirement.
Traditional Defined Benefit Plans
Promise a specific annual retirement benefit based on a formula involving compensation and years of service.
Offer the highest potential tax-deductible contributions.
Cash Balance Plans
The fastest-growing DB plan type.
Combine features of traditional pensions and DC plans: participants receive “pay credits” and “interest credits” in hypothetical accounts.
Often paired with a 401(k) plan to maximize owner contributions.
Ideal for professional practices (medical, legal, financial) and closely held companies seeking to accelerate retirement savings before transition or sale.
Plan Strategy Considerations for 2026
As businesses plan for 2026, several themes are shaping retirement plan decisions:
Higher contribution limits (adjusted annually for inflation) enable owners to shelter more income.
Portability and employee retention continue to drive interest in Safe Harbor 401(k)s and Cash Balance plans.
Succession planning pushes mature owners to use DB plans to accumulate substantial retirement funds quickly.
Administrative efficiency and third-party provider support make complex plans more accessible even for small companies.
Conclusion
Choosing the right retirement plan in 2026 depends on a business’s structure, cash-flow stability, and owner retirement goals. Defined contribution plans deliver flexibility and simplicity, while defined benefit plans offer unmatched savings opportunities for businesses seeking accelerated retirement funding. A tailored combination—commonly a 401(k) paired with a Cash Balance plan—may deliver the strongest results for owners and employees alike.
To learn more, contact and consult with your advisor at SLT CPAs & Advisors.