1. SIMPLE IRAs: Introduction
  2. SIMPLE IRAs: Eligibility Requirements
  3. SIMPLE IRAs: Contributions
  4. SIMPLE IRAs: Distributions
  5. SIMPLE IRAs: Conclusion

By Denise Appleby

A Savings incentive match plan for employees (SIMPLE) is an IRA-based employer plan under which eligible employees are allowed to make contributions to their SIMPLE IRAs, and employers are required to make either matching or nonelective contributions.

Let's recap:

  • SIMPLEs can be established by business owners who had 100 or fewer employees who earned at least $5,000 during the preceding year.
  • Unlike qualified plans, a SIMPLE IRA plan is easy to administer. The start-up and maintenance costs for SIMPLE IRAs are very low compared to qualified plans.
  • Any employer - which includes sole proprietorships, partnerships, corporations and non-profit organizations - may establish a SIMPLE IRA Plan, as long as the employer meets the eligibility requirements.
  • Contributions to SIMPLE IRAs are immediately 100% vested, and the SIMPLE IRA owner (employee)¬†directs the investments.
  • An employer is required to make either dollar-for-dollar matching contributions (not to exceed 3% of the employee's compensation), or 2% nonelective contribution to all eligible employees regardless of whether they make deferral contributions.
  • The tax and penalty treatment applicable to distributions from a SIMPLE IRA is determined by the SIMPLE IRA owner's age at the time of distribution.

Related Articles
  1. Retirement

    SIMPLE IRA Contribution Limits in 2016

    Learn the SIMPLE IRA contribution limits for 2016, with a brief summary of how the plan works, including eligibility and contribution and distribution rules.
  2. Retirement

    SIMPLE IRA Plans: Are They Really Simple?

    Contrary to what their name implies, SIMPLE IRA plans aren't always simple for an employer.
  3. Retirement

    Is a SIMPLE IRA Right for Your Small Business?

    Here's how small businesses can benefit from offering a SIMPLE IRA to their employees.
  4. Retirement

    Retirement Planning For The Self-Employed

    Recent studies show that most self-employed Americans are saving little, if anything, for retirement. But making an investment in yourself is worth it.
  5. Small Business

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  6. Retirement

    You Finally Have Money So Where Should You Save It?

    You can invest your savings in the right places to maximize your tax benefits.
  7. Retirement

    Making Spousal IRA Contributions

    Eligibility requirements, contribution limits and tax deductions all change with one little ring.
  8. Retirement

    Choosing the Right IRA Account

    Selecting the right IRA account depends on a number of factors that need to be considered.
Frequently Asked Questions
  1. What is Common Stock and Preferred Stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ...
  2. Can CareCredit be Used for Family Members?

    Learn more about the available options that CareCredit offers to pay for out-of-pocket medical procedures with little to ...
  3. What is a Wash Sale?

    The Wash-Sale rule was established to forbid a loss deduction of a security sold.
  4. Were Collateralized Debt Obligations (CDO) Responsible for the 2008 Financial Crisis?

    Collateralized debt obligations are exotic financial instruments that can be difficult to understand, Learn the role they ...
Trading Center