SIMPLE IRA vs SEP vs Solo 401(k) for an Owner With Zero W-2 Staff and Six Contractors

The setup

You own a business. You have no W-2 employees. You regularly pay six independent contractors. You want to shelter as much of your own income as the law allows, and you would like to do something for the six.

Those are two separate decisions. The first is which plan you adopt for yourself, and the contractors are irrelevant to it as long as they are properly classified. The second is what you can offer the contractors, and the answer is not "add them to my plan." The Gigaverse business owner program handles the second decision; this article works the first, then connects them.

The three candidates

SIMPLE IRA. Designed for employers with up to 100 employees. For 2026, employee deferrals are capped at $17,000 (with a higher limit for employers with 25 or fewer employees under SECURE 2.0), and the employer must either match up to 3 percent of compensation or contribute 2 percent for all eligible employees. Minimal administration. No Form 5500.

SEP IRA. Employer contributions only, at 25 percent of W-2 compensation or effectively 20 percent of net self-employment earnings after half of SE tax, capped at $72,000 for 2026. No employee deferral. No catch-up. Can be adopted and funded up to the extended return due date. No Form 5500.

Solo 401(k). Employee deferral of $24,500 for 2026 plus the same employer contribution as the SEP, capped at $72,000 total or $80,000 at 50 and older. Deferral must be elected in writing by December 31. Roth deferrals permitted. Loans permitted if the document allows. Form 5500-EZ once assets exceed $250,000. Requires no common-law employees other than owner and spouse.

The numbers at three incomes

Assume Schedule C net profit and an owner under 50.

• •SIMPLE: $17,000 deferral plus 3 percent match on compensation, roughly $2,200. Total about $19,200.
• •SEP: about $14,900.
• •Solo 401(k): $24,500 plus about $14,900. Total about $39,400.

• •SIMPLE: $17,000 plus about $4,200. Total about $21,200.
• •SEP: about $27,900.
• •Solo 401(k): $24,500 plus about $27,900. Total about $52,400.

• •SIMPLE: $17,000 plus about $8,500. Total about $25,500.
• •SEP: 20 percent would be about $57,000, under the $72,000 cap. About $57,000.
• •Solo 401(k): $24,500 plus employer contribution limited so the total does not exceed $72,000. Total $72,000.

At every income the Solo 401(k) allows the most. The SIMPLE never wins for an owner with no employees; its design purpose is to make a plan affordable for a small employer with staff, and its lower limits are the price. The SEP ties the Solo 401(k) only above roughly $360,000 of net profit for an owner under 50, and never for an owner 50 or older, because it has no catch-up.

The tie-breakers when the Solo 401(k) is not automatic

• •You missed December 31. No Solo 401(k) deferral for the prior year. Adopt a SEP for the prior year and a Solo 401(k) for the current year.
• •You expect to hire. A SIMPLE handles the first W-2 employee with no structural change. A SEP requires the same percentage contribution for the employee once eligible, which at 20 percent is expensive. A Solo 401(k) becomes a full 401(k) with testing. If a hire is imminent, model the cost of each before adopting.
• •You want zero paperwork. SEP. But the Form 5500-EZ threshold of $250,000 means most Solo 401(k)s file nothing for several years.
• •You want a backdoor Roth IRA. The Solo 401(k) is the only one of the three that does not create an IRA balance and therefore does not trigger the pro-rata rule on a backdoor conversion.

The six contractors

Now the second decision. Your contractors are not employees, so they cannot participate in any of the three plans, and attempting to include them would assert that they are employees. That is a fact you do not want in the record, particularly in an ABC-test state. CalSavers, which reached every California employer with one or more W-2 employees on January 1, 2026, excludes contractors for the same reason (https://onpay.com/insights/what-is-calsavers-mandate).

What you can do is recognize that each contractor is also a business owner facing the same three-way choice you just made. Each can open a Roth IRA ($7,500) or adopt their own Solo 401(k). A contractor netting $60,000 could shelter about $35,700 in one, versus $7,500 in a Roth IRA. Only 15 to 18 percent of self-employed people use a Solo 401(k) (https://www.solo401k.com/blog/solo401k-adoption-growth-statistics-usa), almost always because nobody showed them.

The features that keep this clean: the contractor opens and funds their own account; you do not contribute, deduct, or condition work on it; you describe it as a resource, not a benefit. If you refer contractors to Gigaverse and are compensated, the compensation is only a share of paid subscription revenue or a per-seat licence arrangement, never per account, per deposit, or on assets, because payments tied to accounts or deposits resemble transaction-based compensation under Exchange Act Section 15(a) and FINRA Rule 2040, and an SEC-registered adviser cannot share advisory fees with unregistered parties. Gigaverse supplies the promoter disclosure SEC Marketing Rule 206(4)-1 requires above $1,000 in twelve months, and some states require paid solicitors of advisory clients to register as investment adviser representatives. Details are on the how we make money page.

Lower-income contractors will also qualify, starting January 1, 2027, for the federal Saver's Match of up to $1,000 paid into a non-Roth IRA on qualifying contributions, including Roth contributions, under MAGI phase-outs of $20,500 to $35,500 single, $30,750 to $53,250 head of household, and $41,000 to $71,000 joint. The Saver's Match Roth rule page explains the mechanics, and the free tools run all three plan comparisons from a Schedule C estimate, including the 2026 mileage split of $0.725 per mile through June and $0.76 from July for contractors who drive.

Where Gigaverse fits

Gigaverse is a subscription retirement app for 1099 workers. For the owner, it computes the three-way comparison above from a running Schedule C estimate and tracks the December 31 election. For the contractors, it is a resource they own and fund themselves. Today the app offers a Roth IRA through a FINRA/SIPC-member broker-dealer; it opens Solo 401(k) and SEP IRA plans through its custodian partner, with applications open now, and provides the contribution math, tracking, and a year-end CPA hand-off alongside them. Gigaverse is pursuing SEC RIA registration, does not guarantee returns, and pays referring owners only through subscription revenue share or per-seat licences. Program details are on the business owner partner page.