What is a SIMPLE IRA plan?
A Savings Incentive Match Plan for Employees (SIMPLE) gives eligible businesses with 100 or fewer employees a way to help employees save for retirement without complicated paperwork and procedures. Each employee sets up a SIMPLE IRA, which is a tax-deferred retirement account. The employer makes tax-deductible contributions to the SIMPLE IRAs. Employees may also contribute to their SIMPLE IRAs through payroll deductions.
A SIMPLE IRA plan is an IRA-based plan that gives small employers a simplified method to make contributions toward their employees’ retirement and their own retirement. Under a SIMPLE IRA plan, employees may choose to make salary reduction contributions and the employer makes matching or nonelective contributions. All contributions are made directly to an Individual Retirement Account or Individual Retirement Annuity (IRA) set up for each employee (a SIMPLE IRA). SIMPLE IRA plans are maintained on a calendar-year basis. See IRS Publication 560, IRS Publication 590 and IRS Notice 98-4 for detailed information on SIMPLE IRA plans.
