What is a SIMPLE IRA?
A SIMPLE IRA is an individual retirement account for self-employed people and small-business owners (under 100 employees). The employer and employee make equal contributions into the fund – with an employer limit of 3% of that year’s compensation. One SIMPLE can be rolled over or transferred into another SIMPLE.
The SIMPLE (Savings Incentive Match Plan for Choose one… Auto Health Home Life Employees) IRA was designed to assist small businesses in offering retirement plans. The SIMPLE plan is for business owners with 100 or less employees. Administrative costs for a SIMPLE IRA are usually lower than plans that are more complex.
A simple IRA is an IRA plan meant for small companies. Simple, or Savings Incentives Match Plan for Employees, Individual Retirement Accounts are meant for companies with fewer than 100 employees. These IRA plans are also ideal for self-employed individuals. Simple IRAs are generally set up one of two ways. The first requires employers to match all employee contributions up to 3% of the employee’s income. In this plan, employees must contribute for their employer to add money to their IRA account. The second requires employers to contribute a flat 2% of their employee’s annual income, regardless of the level of employee contribution. If an employee chooses not to contribute money to their IRA, the company still has to. With simple IRAs, the only way an employee can contribute is through money being taken from their paychecks. This is usually done by percentages, usually 2-5% of each paycheck. The money is tax-free, being removed from the check before taxes are calculated. Employees can
The Savings Incentive Match Plan for Employees (SIMPLEs) were created by the Small Business Jobs Protection Act of 1996, effective January 1, 1997. They were designed for employers with 100 or fewer eligible employees that wish to establish a retirement plan for their employees that allows both employer and employee contributions, while keeping plan administration responsibilities to a minimum. Contribution Opportunities Eligible employees have the ability to defer current income into the SIMPLE IRA plan pretax. Employees can contribute 100 percent of earned income up to $10,500. Employees 50 and over have the ability to contribute an additional $2,500, for a total salary contribution limit of $13,000. The SIMPLE IRA allows employers the flexibility to choose and change the percent of your employees’ earnings that you wish to match in the plan. You can select between a three percent matching contribution (up to $10,500 per participant and match as little as one percent for any two year
Have you been shopping around for the right retirement plan for your business?Does the task seemed filled with paperwork and busy work?If you have less than 100 employees, a SIMPLE IRA might be a good fit. A SIMPLE IRA is a retirement plan designed especially for small businesses and, true to its name, gives you a simplified way to make contributions toward your own retirement and your employees’ retirement. It has the advantages of being easier and less expensive to set up and administer than some other employer-sponsored retirement plans, such as 401ks.In addition, you may deduct all contributions to your employees’ SIMPLE IRAs on your company’s tax return. Here are some facts about SIMPLE IRAs: The company must either generally match employee contributions (dollar for dollar up to 3% of pay) or make a contribution of 2% of pay for all eligible employees. Contributions are 100% immediately vested. To sponsor a SIMPLE, a business cannot have more than 100 employees who received at lea
