What is a SIMPLE 401(k) plan?
In 1997, the SIMPLE 401(k) was established so that small businesses could have an effective, cost-efficient way to offer retirement benefits to their employees. This type of mini plan is targeted at businesses of 100 employees or less that offer no other retirement savings plan. Employees who are 21 years or older and have been employed for at least a year can be eligible to participate in this plan. Employer Contributions – Employers have two options for contribution. The first contribution method encourages employee participation by requiring the employer to match all employee contributions up to 4% of their salaries, with a $6,000 limit. The second option is a fixed contribution plan. In this case, employers pay a flat 3% of a worker’s salary. This contribution is required for all participating employees, regardless of whether the employees contribute on their own. SIMPLE Plans vs. Traditional Plans Less expensive? The SIMPLE 401(k) is not subject to the stringent discrimination tes
