Savings Incentive Match Plan for Employees(SIMPLE)IRA

The Savings Incentive Match Plan for Employees (SIMPLE) IRA is a tax-qualified retirement plan for businesses (C Corps, S Corps, Partnerships, and Sole Proprietorships) with fewer than 100 employees. It enables eligible firms to offer 401k-type benefits without complicated rules or high administrative expenses. It enables eligible employees to make tax-deductible contributions beyond what a traditional IRA allows.

For businesses, SIMPLE means:
  • No top-heavy rules.
  • No discrimination testing.
  • No Form 5500 filings each year.
  • Fully deductible contributions (subject to certain limits).
For individuals, SIMPLE means:
  • Contribution limits far above what a traditional IRA allows.
  • Complete investment control.
  • Some level of employer contributions.
  • Full and immediate vesting of employer contributions.
Required employer contributions can be made on either a 3 percent “elective” basis or a 2 percent “non-elective” basis.

Under the elective method, the employer is required to contribute only if an employee “elects” to contribute. Under the non-elective method, the employer contributes a flat percentage of compensation (2 percent minimum) for everyone regardless of any personal participation.