• The SIMPLE IRA
• The Benefits of a SIMPLE IRA
• What is SIMPLE IRA eligibility?
• What is the maximum that can be contributed?
• What are contribution options and limits?
• What is the deadline for setting up a SIMPLE IRA Plan?

The SIMPLE IRA

SIMPLE stands for Savings Incentive Match Plan for Employees, it is a written arrangement that provides a simplified way to make contributions to provide retirement income for employer and employees. Under a SIMPLE IRA, employees may choose whether to make salary reduction contributions to the SIMPLE plan. In addition, an employer will contribute matching or nonelective contributions on behalf of eligible employees.

The Benefits of a SIMPLE IRA

For the employer, a SIMPLE IRA is a benefit plan that can help attract and retain valuable employees. The plan is easy to establish and administer, and there is no annual government reporting required (no annual 5500 filing). The burden of funding the plan is shared by employer and employee, and the employer may take a tax deduction for the entire amount contributed on behalf of each employee. For the employee, the self-directed SIMPLE IRA offers the ability to save more towards retirement than through an IRA. Contributions are made on a pretax basis and will accumulate tax-deferred until distributed from the plan.

What is SIMPLE IRA eligibility?

Employers are eligible to establish and maintain a SIMPLE plan only if the employer:

• has no more than 100 employees (including self-employed individuals) who earned $5,000 or more in compensation during that year; and;
• does not maintain another qualified retirement plan, 403(b), or SEP at the same time.

What is the maximum that can be contributed?

Employees can defer all or part of their salary. The following table summarizes:

What are contribution options and limits?

The SIMPLE IRA has a mandatory employer contribution requirement. This contribution requirement can generally be made as follows:

1. The employer can make a dollar-for-dollar matching contribution on the first 3% of compensation that the individual elects to defer, or;
2. The employer can make a nonelective contribution of 2% of each employee's compensation (up to $245,000) for all eligible employees.
   You may choose to give the nonelective contributions only to eligible employees who make $5,000 or more in the year.

What is the deadline for setting up a SIMPLE IRA Plan?

SIMPLE IRA Plans must be established by October 1st to make a contribution for the current year.