Which retirement plan should a veterinary practice offer?
The honest answer: the SIMPLE IRA and the safe harbor 401(k) solve different problems.
The SIMPLE IRA is the lighter lift — lower limits, but an employer contribution you must make every year.
The safe harbor 401(k) gives your associates far more deferral room and takes annual nondiscrimination testing off the table, in exchange for employer money that is fully vested when made.
This page covers both, plus profit sharing, SECURE 2.0 startup credits, and the state auto-IRA mandates.
Rules vary by state and change
This guide explains federal rules and the state rules it names, as of the date above.
Employment law and veterinary practice rules differ by state and are revised often, so confirm current requirements with your state veterinary board, labor agency or employment counsel before you act on them.
It is general information, not legal advice.
Do you have to offer one? State auto-IRA mandates
Our research found no federal law that requires a private employer to offer a retirement plan — the obligations that do exist come from state auto-IRA programs, which require employers that don't sponsor a qualified retirement plan to register with the state program or certify an exemption.
Three programs:
- California: CalSavers is mandated for employers with one or more employees that don't offer a qualified plan; the registration/exemption deadline for employers with at least one employee was December 31, 2025.
- Oregon: employers that don't offer a workplace retirement plan must register for OregonSaves or certify an exemption by their deadline — and employers cannot contribute to employee OregonSaves accounts.
- Illinois: My Illinois Savings is required for employers with at least 5 employees in every quarter of the previous year, in business at least 2 years, that don't offer a qualified retirement plan.
The decision those mandates create is the one this page answers.
Sponsoring a qualified plan of your own is what takes a practice out of the mandate, and — unlike OregonSaves, which employers cannot contribute to — a plan you sponsor is the vehicle where your money can go in behind the employee's own savings.
Even where no mandate reaches you, a plan is a recruiting lever.
Retirement sits inside the benefits package candidates compare across offers, and employer money in a plan is the piece a candidate cannot recreate on their own.
Other states run their own auto-IRA programs and the details move; if your practice operates anywhere else, check your state's program before assuming no obligation exists.
SIMPLE IRA: limits and employer contribution rules
A SIMPLE IRA plan is generally available to businesses with 100 or fewer employees, and setup timing is forgiving: you can make a SIMPLE IRA plan effective on any date from January 1 through October 1 of a year, provided you did not previously maintain one.
The trade is an employer contribution you owe every year, on one of two formulas: a dollar-for-dollar match up to 3% of pay for employees who defer, or a 2% nonelective contribution for every eligible employee, whether they defer or not.
SECURE 2.0 also allows an extra uniform nonelective contribution of up to the lesser of 10% of compensation or $5,000, if you want to add more on top.
Employee deferrals are capped at $17,000 for 2026, or $18,100 for certain plans — for example, employers with 25 or fewer employees.
The higher limit comes paired with richer contribution options for employers with 26 to 100 employees (a 4% match or a 3% nonelective instead of the standard formulas), so confirm the exact conditions with your plan provider before electing it.
Participants aged 50 or over add a $4,000 catch-up; those who turn 60, 61, 62 or 63 get $5,250.
Eligibility reaches part-time staff, which matters on a roster that mixes full-time technicians and associates with part-time reception and kennel coverage: a SIMPLE IRA plan should generally include any employee who received at least $5,000 in compensation from you during any two preceding calendar years and is expected to receive at least $5,000 in the current year, so many part-timers qualify.
Safe harbor 401(k)
A traditional 401(k) plan faces annual nondiscrimination tests, and the safe harbor design buys its way out of them with employer money.
The tests turn on a defined category, highly compensated employees — for 2026, the threshold is $160,000.
Where the pay spread between your DVMs and your support staff is wide enough to put the owner and associate veterinarians above that line, the tests can restrict how much the well-paid employees may actually defer — have your plan provider model them on your roster before you promise anyone headroom.
The safe harbor trade: the plan must provide employer contributions that are fully vested when made, and in return it is not subject to the annual nondiscrimination tests that apply to traditional 401(k) plans.
With the tests out of the picture, your associates' deferrals — and yours — are decided by the plan's terms rather than by a test outcome.
Safe harbor sponsors also owe each eligible employee an annual written notice of their rights and obligations under the plan — one more compliance date to calendar alongside renewals.
Two SECURE 2.0 rules shape any 401(k) you start now, safe harbor or not.
First, part-time eligibility: for 401(k) plan years beginning after 2024, the plan cannot make long-term part-time employees wait beyond 2 consecutive 12-month periods, in each of which they have at least 500 hours of service, before making elective deferrals — confirm the transition mechanics with your plan provider.
Second, auto-enrollment: new 401(k) plans established after December 29, 2022 must automatically enroll eligible employees at an initial rate of at least 3% and no more than 10% of pay for plan years beginning after December 31, 2024, with the default escalating one point a year to at least 10%.
The mandate does not apply while the employer has existed for less than 3 years, and it does not apply until 1 year after the close of the first tax year in which the employer normally employed more than 10 employees.
Practice owners have one pre-built lane worth asking about: AVMA PLIT's site lists an Association Retirement Plan among the employee-benefits coverages it offers practice owners, and its two legacy programs began transitioning in 2025 to the single AVMA Insurance Services brand.
The details live on PLIT's own page, not here.
Profit sharing for owners and associates
Profit sharing is employer money in the plan beyond what employees defer themselves.
The arithmetic that matters: for defined contribution plans, the 2026 total annual additions limit — employee plus employer contributions, profit sharing included — is $72,000 per employee.
Deferrals alone max out well below that, so the space between a maxed deferral and $72,000 is the room employer money can fill, whether it is a safe harbor contribution, a match, or profit sharing.
The pay that counts toward a plan is capped too: for 2026, $360,000 per employee.
A plan document that allocates employer contributions as a percentage of compensation applies that percentage only up to the ceiling.
The design question worth taking to your accountant: can the contribution be decided each year, once the year's results are visible, inside the allocation formula the plan document sets?
Whether that flexibility is available on your plan is exactly what the document and your tax professional will answer.
For an owner who wants employer dollars above the deferral limit behind themselves or a producing associate, it is the feature to price — and how contributions would divide among associates, technicians and CSRs is the rest of that design conversation.
SECURE 2.0 startup tax credits
Three tax credits can offset the cost of starting.
The startup credit applies across the designs on this page — it covers the ordinary and necessary costs of starting a SEP, a SIMPLE IRA or a qualified plan like a 401(k).
The startup cost credit.
Eligible employers can claim up to $5,000 a year for three years.
It requires 100 or fewer employees who earned at least $5,000.
With 50 or fewer such employees, the credit is 100% of eligible startup costs, capped at the greater of $500 or $250 per eligible non-highly compensated employee, up to $5,000; with 51 to 100 such employees, it is 50% of eligible costs.
The employer contribution credit.
For a new defined contribution plan, a second credit covers employer contributions of up to $1,000 per employee.
It runs at full value in each of the first two years, then phases down — 75% in year three, 50% in year four, 25% in year five — and it is reduced for employers with more than 50 employees.
The auto-enrollment credit.
Adding an eligible auto-enrollment feature to a new or existing plan earns $500 per year for three years.
For a practice whose new 401(k) must carry auto-enrollment anyway, ask the plan provider whether the mandated design is the eligible feature the credit pays for.
One more SECURE 2.0 feature belongs on the radar when you are recruiting debt-heavy new graduates: Section 110 of the act lets employers make matching contributions on employees' qualified student loan payments in 401(k), 403(b), SIMPLE IRA and governmental 457(b) plans, for plan years beginning after December 31, 2023.
It has its own moving parts — our guide to the 401(k) match on student loans covers the design.
2026 contribution limits
These are the 2026 figures a practice's plan decision turns on, from IRS Notice 2025-67.
The IRS adjusts them from year to year — some move, some stay put — so copy the current-year numbers into payroll and plan paperwork exactly as printed.
| 2026 limit | Amount |
|---|---|
| 401(k) elective deferral | $24,500 |
| 401(k) catch-up, age 50 or over | $8,000 |
| 401(k) catch-up, turning 60–63 | $11,250 |
| SIMPLE IRA elective deferral | $17,000 ($18,100 for certain plans) |
| SIMPLE IRA catch-up, age 50 or over | $4,000 |
| SIMPLE IRA catch-up, turning 60–63 | $5,250 |
| Total annual additions, defined contribution plans (employee + employer) | $72,000 |
| Annual compensation counted under a plan | $360,000 |
| Highly compensated employee threshold | $160,000 |
| Roth catch-up wage threshold | $150,000 (2025 wages, applied for 2026) |
The 401(k) elective deferral limit rises to $24,500, the standard catch-up for participants aged 50 or over rises to $8,000, and the higher catch-up for participants who turn 60, 61, 62 or 63 remains $11,250.
One rule catches owners off guard: above a wage threshold of $150,000 — set against 2025 wages and applied for 2026 — catch-up contributions must be made as Roth contributions, after tax.
For a well-paid owner or senior associate planning to use the age-50 catch-up, that changes the payroll mechanics, not just the tax timing.
Whichever design you land on, the plan is one move in a longer hiring strategy.
The veterinary hiring hub collects the rest of the employer guides, including the role salary guides and the rest of the benefits series.
Before you pick a plan
- Check whether your state runs an auto-IRA program — California, Oregon and Illinois each do, with different qualifying rules — and confirm that sponsoring a qualified plan takes you out of the mandate
- Count your employees, and within them the ones who received at least $5,000: the first count is the SIMPLE plan's 100-employee ceiling, the second drives SIMPLE IRA eligibility and the startup credit
- Price the mandatory money first: the SIMPLE IRA's 3% match or 2% nonelective, or the safe harbor contributions that are fully vested when made
- If you start a safe harbor 401(k), calendar the annual notice of rights and obligations; and unless an exemption applies, build the required auto-enrollment default — at least 3%, at most 10%, escalating annually — into any new 401(k)
- Ask each provider for the full annual cost and which of the three SECURE 2.0 credits the practice qualifies for
- Take the allocation formula and the owner's contribution math to your tax professional before you sign