Retirement Plans
SIMPLE Plans
SIMPLE (Savings Incentive Match Plan for Employees) Plans are ideal for smaller employers with 100 or fewer employees who don’t want the administrative commitment required to manage a traditional 401(k) Plan. They require minimal government reporting and are not subject to the non-discrimination testing and top-heavy rules that govern 401(k) Plans.
A SIMPLE Plan can be established using IRAs as the funding vehicle for each employee, or as part of a 401(k) plan using a trust as the funding vehicle. In either case:
- Participants can make pre-tax deferrals of up to $10,000 per year.
- Employers must make an additional contribution in one of two ways:
- Match participant deferrals on a dollar-for-dollar basis, up to 3% of the participant’s income.
- Make a profit-sharing type contribution—worth 2% of income—to every eligible person in the company, regardless of whether or not they contribute to the SIMPLE Plan.
- All employer contributions are immediately 100% vested.
A SIMPLE IRA account can be rolled over to another SIMPLE IRA, or after two years of participation in the SIMPLE Plan, to a traditional IRA. However, rollovers can be made from one SIMPLE 401(k) plan to an IRA or other qualified plan at anytime.
For an IRA-based plan, withdrawals from the SIMPLE Plan before age 59-1/2 are subject to a 25% penalty during the employee’s first two years of participation in the plan. After this time, they are subject to the ordinary 10% penalty.
To get more detailed information, and to learn more specifically how a SIMPLE Plan may benefit your organization, please contact us for a personal consultation.