Exactly. The whole thing is a nightmare. SEP/Simple-IRA/Solo-401k/401k/IRAs
They really should just drop the whole aspect of it being tied to the employer, and increase the IRA limits to the 401k limits. It loses out on the matching and the taxes are paid in the paycheck, but given back after filing.
What would be the benefit to this? All I see is from that would be a HUGE amount of employer contributions that are made for people's retirement would no longer be provided. I see zero upside to eliminating 401(k) plans in favor of a high limit IRAs and a lot of downside. What am I missing here?
Increase limits on IRAs in addition to 401(k) plans being offered, sure that's fine I suppose. It might decrease the number of employer sponsored plans which wouldn't be ideal, but it would give more options to those without access to an employer plan. But replacing 401(k) with just IRAs instead just seems like a huge step backwards in my opinion.
Why is any of this a nightmare? Aren't you getting an extra 4% in the form of a SH match from your company that you wouldn't otherwise be getting in a high limit IRA?
If something better than a 401(k) plan is established, I'm all ears, but that's not an IRA in my opinion. Recent legislation passed o allow a lot more in regards to multiple employer plans, which is supposed to leverage economies of scale to reduce costs of offering a plan to employers, but too soon to tell if how that will work out.
I'm in agreement with most of Rick's points on this subject Did I just say that