What is a SIMPLE IRA?

    The Savings Incentive Match Plan for Employees (SIMPLE) was designed for employers with 100 or fewer eligible employees. A
    SIMPLE IRA allows employer and employee contributions and keeps plan administration responsibilities to a minimum.

    SIMPLE IRA

    At A Glance




















    SIMPLE IRA Benefits

    Employer Benefits
    •        Employer contributions are tax deductible.
    •        Earnings on employer contributions are not taxable to the corporation.
    •        Attract and retain quality employees.
    •        Improved employee morale, productivity and employer/employee relations.

    Employee Benefits
    •        Employer contributions and employee salary deferrals are not taxed until withdrawn.
    •        Earnings on plan assets are not taxed until withdrawn.
SIMPLE IRA
Who May Establish
 •  All business types.
•  For-profit and not-for-profit organizations with 100 or fewer employees.
Administrator Testing
 None.
Establishment
 New plans must be established by October 1 of the year for which the plan is to be
effective.
Employer Contributions
 •  Mandatory: 100 percent match on the first 3 percent of compensation deferred. The 3
percent match may be reduced as low as 1 percent in two years out of a five-year period.
OR
•  Non-elective: flat 2 percent of each eligible employee’s compensation.
Employee Contributions
 2010 tax year:
•        The lesser of $11,500 or 100 percent of earned income.
•        Up to $2,500 for participants age 50 or older.
Excludable Employees
 Certain union employees or non-resident alien employees.
Employee Eligibility Requirements
 •        Earned at least $5,000 in compensation in each of the previous two years
•        Earn at least $5,000 in compensation for the current calendar year.
  $15
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