SIMPLE IRAs: Conclusion

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By Denise Appleby

Savings incentive match plan for employees (SIMPLE) is an IRA-based employer plan by 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 - with one or more employees may establish a SEP Plan.
  • Contributions to SIMPLE IRAs are immediately 100% vested, and the IRA owner 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.






by

Denise Appleby

Denise Appleby
Denise Appleby is founder and owner of Appleby Retirement Consulting,which provides technical consultation, content, coaching, writing, editing and training services on related topics.


With more than 14 years of experience in the IRA and defined-contribution plans fields, Appleby has held several senior retirement-plan related positions with Pershing LLC, which included vice president of plans products and services, retirement plans manager, trainer, training manager, compliance consultant, technical help desk manager and writer.

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