Summary of SIMPLE-IRA Plans
General Overview
The SIMPLE-IRA Plan was designed to make it easier for small businesses to offer a tax-advantaged, company-sponsored retirement plan. The SIMPLE plan is a flexible, easy to administer retirement plan for businesses with 100 or fewer employees. SIMPLE plans are funded by employer contributions and can be funded by elective employee salary deferrals. Funds are deposited in individual employee SIMPLE-IRA accounts. Investments are managed by each individual employee.
Eligibility
Businesses with 100 or fewer eligible employees and who do not currently maintain any other retirement plan
Key Advantages
Salary reduction plan with less administration and responsibilities
No requirement against top-heavy plans
No maximum percentage contribution
Key Disadvantages
Employer must contribute
Lower maximum contributions
Funding Responsibility
Funded by employee salary reduction contributions and employer contributions
Annual Contribution Per Participant
Employee: up to 100% of compensation, up to a maximum of $6,000 per year (as indexed)
Employer: Either match employee contributions dollar for dollar up to 3% of compensation (maximum $6,000 as indexed); can be reduced to as low as 1% in any 2 out of 5 yrs. Or contribute 2% of each eligible employee's compensation, up to $3,200
Access to Assets
Withdrawals at any time. If employee is under age 59 1/2, withdrawals generally may be subject to a 25% penalty if taken within the first two years of beginning participation and a possible 10% penalty if taken after that time period.
Vesting of Contributions
Employee and employer contributions vested 100% immediately
Administrative Responsibilities
No employer tax filings
Administrative Costs and Fees
Generally low administrative costs and fees. However, since each participant has an individual account, fees can add up if there are larger numbers of participants.
All limits and features are for the 1999 plan year.
More information:
SIMPLE Retirement Plans
(11/20/00 Update)
SIMPLE Retirement Plans
(Overview as of 10/03/96)
© Copyright 2000 Raymond S. Kulzick. All rights reserved. 000210.
This publication provides business, financial planning, and/or tax information to our clients. All material is for general information only and should not be acted upon without seeking appropriate professional assistance.