Most business owners want a retirement plan that meets the following criteria:

• Current tax benefit on contributions.
• Ability to minimize or avoid contributions when cash flow is tight.
• Only cover full time, long term employees.
• High percentage (70 percent or more) of every dollar goes toward owner’s retirement.

Maine-based small business owners have some new choices in qualified retirement plans. Current tax law allows more money to be set aside for business owners and key employees, including their spouses.

Two relatively new plans worth considering are:

The Solo 401(k) Plan allows a one-person firm (a spouse can be the one other employee) to put away up to $52,000 pre-tax in 2014.

The 2014 contribution limit is based on a formula that allows an employee to personally contribute up to $17,500 and the employer to contribute up to 25 percent of salary. And of course, a self-employed person is essentially both the employer and the employee. In this case, the employer contribution can be up to 20 percent of the individual’s self-employment income.

Solo 401(k)s follow the same guidelines as other 401(k) plans so the company is forced to include most employees and contribute a similar percent for them. Therefore, these plans are best suited for companies with one or two people. If you are planning to add even one full-time employee to your business, talk with Filler & Associates before you hire someone to decide how to proceed with your retirement plan.

The Solo Defined Benefit Plan is skewed in favor of employee-owners age 45 and older. These plans can potentially allow tax contributions up to $100,000, as the covered individual nears retirement age.

Other features include flexibility of investments including stocks, bonds, exchange traded funds, mutual funds and other investments. The contribution limit is not based on a percentage of compensation, but is recalculated each year by an actuary.

The two options described here are certainly not the only ones available for your small business. Consult with Filler & Associates to determine the best way to fund your retirement while complying with federal laws.