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Chris,

The best thing you can do is read IRS publication 560. It explains all of your options: SEP, SIMPLE, Keogh.

There isn't really a way to just cut out employees, but all three plans allow you to place restrictions on who can qualify. The primary rule that seems to apply is that you can limit all plans to those employees that have been around for 5 years or more.

SEP and Keogh plans are funded by the employer, so he would have to fund plans for himself and employees that meet his restrictions.

A SIMPLE plan is primarily funded by employees through a payroll deduction. There is a secondary (and pretty minor) employer component.

If you make less than $27,272.73 then a SIMPLE plan will allow you to contribute the largest sum of money. Above that amount Keogh is your best bet.

jbw
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