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SIMPLE IRA

Give your employees an added benefit and peace of mind—all without taking on large costs and administrative burdens. A SIMPLE IRA provides small companies an alternative to complex, tax-qualified retirement plans.

As your employee makes elective plan contributions, you simply match theirs. And there's less reporting requirements involved. Best of all, your company's contributions are tax deductible.

Summary

Requirements

  • Available for businesses with no more than 100 employees who earned at least $5,000 in compensation during the preceding year
  • Businesses cannot maintain another employer sponsored retirement plan
  • Withdrawals before age 59½ subject to penalty

Benefit for employer

  • Gain your employees trust and respect
  • Generally cheaper and less complex than tax-qualified plans
  • Not subject to special 401(k) nondiscrimination test or top-heavy rules
  • Less restrictive than individual IRAs
  • Contributions are fully and currently tax deductible
  • Employees make contributions to which you match*
  • Establish a SIMPLE plan as an IRA for each employee or as part of a 401(k) plan

Benefits for employees

  • Fully vested, tax-deferred retirement
  • Available for self-employed individuals and company employees
  • Employees 50+ may make "catch-up" contributions
  • Employer makes matching contributions
  • Employer contributions are not includable in employee incomes for income-tax purposes
  • Tax-free until time of withdrawal
  • Annual contributions can be made to a separate IRA up to the annual contribution limit

*Matching contributions are required up to 3% of participating employees' compensation or a nonelective contribution of 2% is required for all eligible employees.