SIMPLE IRA Plan

SIMPLE IRA Plan

A SIMPLE IRA plan (Savings Incentive Match PLan for Employees) allows employees and employers to contribute to traditional IRAs set up for employees. It is ideally suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.

SIMPLE IRA plans can provide a significant source of income at retirement by allowing employers and employees to set aside money in retirement accounts. SIMPLE IRA plans do not have the start-up and operating costs of a conventional retirement plan.

  • Available to any small business – generally with 100 or fewer employees
  • Employer cannot have any other retirement plan
  • No filing requirement for the employer
  • Contributions:
    1. Employer is required to contribute each year either a:
      • Matching contribution up to 3% of compensation (not limited by the annual compensation limit), or
      • 2% nonelective contribution for each eligible employee:
        • Under the “nonelective” contribution formula, even if an eligible employee doesn’t contribute to his or her SIMPLE IRA, that employee must still receive an employer contribution to his or her SIMPLE IRA equal to 2% of his or her compensation up to the annual limit of $275,000 for 2018

    2. Employees may elect to contribute

    3. Employee is always 100% vested in (or, has ownership of) all SIMPLE IRA money
  • Easy and inexpensive to set up and operate
  • Employees share responsibility for their retirement
  • No discrimination testing required
  • Inflexible contributions
  • Lower contribution limits than some other retirement plans
  • Who Contributes: Employer must contribute and employee may contribute.
  • Contribution Limits: Total contributions to each employee’s SIMPLE IRA are limited.
  • Filing Requirements: An employer generally has no filing requirements.
  • Participant Loans: Not permitted. The assets may not be used as collateral.
  • In-Service Withdrawals: Yes, but includible in income and subject to a 10% additional tax if under age 59-1/2. Also, if withdrawals are made within the first two years of participation, the 10% additional tax is increased to 25%.

Investment advisory services offered through Allmerits Asset Management, LLC, a Registered Investment Adviser firm. Allmerits Asset Management does not provide legal or tax advice. Investment Adviser Representatives of Allmerits Asset Management may only conduct business with residents of the states and jurisdictions in which they are properly registered or exempt from registration requirements. Insurance and Annuity products are sold separately through Allmerits Financial and Insurance Service. Securities transactions for Allmerits Asset Management clients are through Trust Company of America, TD Ameritrade, Nationwide, John Hancock and American Funds.