Great question. For starters, all businesses can contribute a maximum of $49k per year (increasing to $50k in 2012) per employee per year. This includes self-employed individuals, since a sole-proprietor is seen as a business.

A self-employed person can use a SEP IRA as their retirement plan. With a SEP, you can put way as much as 20% of your net-self employment earnings, up to the annual max.

Businesses with employees generally contribute to a retirement plan on behalf of their staff using 3 different components.

1. They start with a 401k component, which allows employees to contribute up to $16.5k (increasing to $17k in 2012) through salary deferrals. This money comes out of each employee's salary throughout the year. Anyone 50 or older by December 31st can contribute an additional $5.5k as "catch-up contributions".

2. Many businesses then make a matching contribution. If you put away a certain percentage of your salary, your employer will contribute a percentage of your salary as well. No salary deferral generally means no match.

3. Finally, many businesses make an additional Profit Sharing Plan contribution into each eligible employee's retirement account. This contribution is based on a variety of factors, and will be allocated to each employee based on income, age, and other variables.

For businesses, the maximum annual contribution for the total of these three components is $49k - the same limit as with a SEP.

Ask your employer for a Summary Plan Description to learn about the matching contributions and Profit Sharing Plan contributions they will be making on your behalf each year.

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