Small businesses make up the majority of firms in the United States, but companies with fewer than 100 workers may be less likely to sponsor a retirement plan. In addition, many of the 15 million sole proprietors in the United States face challenges when saving for retirement. A TD Ameritrade survey found only 10% of self-employed individuals regularly set aside a portion of earnings for retirement while 28% don’t save for retirement at all. Among those who do save, 83% reported that they had to cut back or pause saving at one time or another.

A Simplified Employee Pension (SEP) IRA can provide an opportunity for small businesses and sole proprietors to establish a retirement savings plan. Like a traditional IRA, investors in a SEP have until the tax-filing deadline to make a contribution for the previous tax year.

SEP IRA accounts offer several benefits.

1. Contributions are tax-deductible.

Investors can take a federal income tax deduction equal to the amount of their employer contributions, up to a maximum of 25% of compensation paid during the year. For self-employed individuals, the deduction is limited to 20% of net earnings after expenses.

2. High contribution limits may help maximize retirement savings.

There is a contribution limit for 2015 of $53,000 or 25% of compensation, whichever is less. Self-employed individuals can contribute up to 20% of compensation.

3. Contributions are discretionary.

Employees can decide every year what amount they want to contribute, which can vary from year to year or be skipped. For business owners, contributions must be nondiscriminatory, and the same salary percentage must be contributed to each eligible employee’s account.

4. A retirement benefit may help employee retention.

An increasing number of surveys point to benefits as an important consideration for job-seekers. Offering a retirement plan may help attract and retain talent and helps workers prepare for the future.

With the 2015 tax season underway, it is an opportune time for advisors to reach out to small business owners and sole proprietors to discuss retirement savings options including the SEP IRA.

For more information on the benefits of a SEP IRA, read Putnam’s fact sheet.