401(k), SIMPLE IRA or Profit Sharing for a Dental Practice

A retirement plan is one of the employee benefits a practice can put in its offer, and small employers still trail the market on it: in March 2026, 55% of private industry workers at establishments with 1 to 49 workers had access to retirement benefits, versus 72% of all private industry workers.

DentistryHires listings are a separate measure.

As of October 6, 2026, 58% of active dental hygienist listings and 62% of dental assistant listings on DentistryHires named a 401(k) — and our counts include only listings that name the benefit, so actual coverage may be higher.

The SIMPLE IRA is easily established, and it is generally available to small businesses with 100 or fewer employees.

The rule that shapes everything else is exclusivity — while the practice sponsors a SIMPLE IRA, it cannot maintain any other retirement plan.

You cannot skip funding it, either.

Each year, the practice must contribute either a match of up to 3% of compensation or a 2% nonelective contribution for each eligible employee.

Deferrals are the trade-off.

Employees can defer up to $17,000 in 2026, with a $4,000 catch-up from age 50 and a $5,250 catch-up at ages 60 to 63 — and under SECURE 2.0, employers with 25 or fewer employees get a higher deferral limit of $18,100.

Choose it when simplicity is worth more than ceiling: a practice that wants a plan it can explain in one paragraph, with owners whose own retirement saving does not need 401(k)-level limits.

The moment the owner dentist wants to defer seriously, the $17,000 line starts to pinch.

A traditional 401(k) has to pass annual nondiscrimination tests — the ADP and ACP tests — to verify that employee deferrals and matching contributions do not favor highly compensated employees.

In a practice where the owner dentist is the one deferring the most, those tests are the annual constraint.

A safe harbor 401(k) buys its way out.

The plan provides employer contributions that are fully vested when made, and in exchange it is not subject to the annual ADP/ACP nondiscrimination tests.

Two contribution designs qualify:

• Match: 100% of each non-highly compensated employee's deferrals up to 3% of pay, plus 50% of deferrals from 3% up to 5% of pay.
• Nonelective: at least 3% of pay for every eligible non-highly compensated employee.

Either way the money is mandatory, immediately 100% vested, and accompanied by a written notice of employees' rights that must go out a reasonable period before each plan year.

Budget the safe harbor contribution as fixed payroll cost, not a year-end decision.

Owner-heavy practices also live with the top-heavy rules.

A 401(k) is generally top-heavy when key employees hold more than 60% of total account balances, which can require minimum employer contributions for everyone else.

A safe harbor plan made up solely of safe harbor contributions is exempt from the top-heavy rules — one more reason owner-heavy practices land here.

A profit-sharing plan is the flexible end of the menu.

Employer contributions are discretionary — you decide each year whether to fund and how much — and despite the name, the business does not need a profit to contribute.

The exception is the owner's own account when the owner is self-employed.

Two limits frame the design.

Deductible employer contributions to a profit-sharing plan cannot exceed 25% of the compensation paid to participating employees for the year.

And the combined ceiling on everything going into one participant's account — employee deferrals plus employer contributions — is $72,000 for 2026 in a defined contribution plan, with compensation counted for plan purposes capped at $360,000.

Profit sharing does not have to stand alone: it can sit as an employer contribution inside the practice's 401(k), so staff defer through the 401(k) while the practice adds an allocation on top.

Both count against that $72,000.

The allocation formula is where a plan administrator earns their keep.

Ask the administrator about owner-weighted designs if the goal is to direct more of the employer contribution toward the owners.

Those designs exist and must pass nondiscrimination testing on their own numbers — treat them as a plan-administrator decision, not a do-it-yourself setting.

Keep one distinction straight: a profit-sharing contribution is plan money allocated to participants' accounts under the plan's formula, not cash in the next payroll.

If you are weighing it against cash rewards for a strong year, read our guide to bonus plans before you promise either.

The IRS raised the 401(k) employee deferral limit to $24,500 for 2026, up from $23,500 in 2025 — so any checklist or article still quoting the 2025 limits is out of date.

Catch-up room widens the ceiling: employees 50 and older can add $8,000, generally bringing them to $32,500, and employees aged 60 to 63 get a higher $11,250 catch-up.

Three plan-design numbers matter as much as the deferral limits.

Total annual additions — employee plus employer contributions — cap at $72,000 per participant in a defined contribution plan for 2026.

Compensation counted for plan purposes caps at $360,000.

And the highly compensated employee threshold is $160,000, with any 5% owner an HCE regardless of pay — the definition that drives the ADP/ACP tests and keys the safe harbor contributions described above.

Limits adjust annually.

Recheck them when you set deferral defaults each year and before the year-end contribution decision — the IRS publishes the updated figures on its cost-of-living adjustments page for retirement plans.

The tax code pays part of the setup bill.

An eligible employer — 100 or fewer employees who earned at least $5,000, with at least one non-highly compensated participant — can claim a tax credit for retirement plan startup costs of up to $5,000 a year for three years, for starting a SEP, a SIMPLE IRA or a qualified plan such as a 401(k).

The percentage depends on size.

With 50 or fewer employees, the credit is 100% of eligible startup costs, up to the greater of $500 or the lesser of $250 per eligible non-highly compensated employee or $5,000.

Employers with 51 to 100 employees get 50%.

A second credit helps with the funding itself.

Employers with 1 to 50 employees can also claim a credit for employer contributions to the new plan of up to $1,000 per participant — 100% in years 1 and 2, 75% in year 3, 50% in year 4 and 25% in year 5.

It does not apply to employees earning over $100,000, a cap that indexes.

Adding automatic enrollment earns one more: an extra $500 a year for three years, on a new or existing plan.

Have whoever sets the plan up model these credits against their quote before you write the idea off on cost.

If you start a 401(k) now, SECURE 2.0 shapes how it runs.

Plans established on or after December 29, 2022 must automatically enroll eligible employees for plan years beginning after 2024, subject to exceptions.

The default deferral must be at least 3% and no more than 10% of pay, rising one percentage point a year to at least 10% (15% max) unless the employee opts out or picks a different rate.

Two exceptions matter for small practices.

The mandate does not apply while the employer has existed for less than 3 years, and it does not apply until one year after the close of the first tax year in which the employer normally employed more than 10 employees — so a practice that has stayed at 10 or fewer staff is not yet required to auto-enroll.

The sharper deadlines come from the states.

California's CalSavers mandate covers employers with at least one employee that do not sponsor a qualified retirement plan; the final registration deadline was December 31, 2025.

The program charges employers no fees, and employers do not contribute to employee accounts.

A law-firm summary of the program puts penalties at $250 per eligible employee for initial noncompliance plus $500 per eligible employee for continued noncompliance — confirm current amounts with CalSavers before relying on them.

Illinois Secure Choice reaches employers with at least 5 Illinois employees in every quarter of the prior year, in business at least 2 years, that do not offer a qualified retirement plan.

Covered employers must automatically enroll each employee who has been employed 120 days or more.

Several states, including California and Illinois, require employers without a retirement plan to offer a state program.

Both programs attach because the employer does not offer a qualified retirement plan — which is what makes the plan decision earlier in this guide more than a benefits question in a mandate state.

Confirm your state's program rules, and that the plan you adopt takes you out of its scope, with the program and your plan administrator.

Retirement is one decision inside a bigger hiring picture.

The dental hiring hub collects the rest — pay, contracts, screening and keeping the staff you hire.