A SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) IRA plan offers great advantages for businesses that meet two basic criteria. First, your business must have 100 or fewer employees (who earned $5,000 or more during the preceding calendar year). In addition, you cannot currently have another retirement plan.
A SIMPLE IRA plan provides you and your employees with a simplified way to contribute toward retirement. It reduces taxes and, at the same time, attracts and retains quality employees. Compared to other types of retirement plans, SIMPLE IRA plans offer lower start-up and annual costs.
The most you will contribute as an employer is 3% of your employee's gross pay. This is a significant cost saving over a SEP plan. With a SIMPLE plan you as the employer are able to contribute the maximum amount to your retirement account and you can offer your employees an attractive benefit without having to be the sole contributor to their retirement accounts.
SIMPLE IRA plans are easy to set up and run – your financial institution handles most of the details. Employees contribute, on a tax-deferred basis, through payroll deductions. You can choose either to match the employee contributions of those who decide to participate or to contribute a fixed percentage of all eligible employees’ pay. The most you will pay as an employer is 3% of your employee's gross pay. This is a significant cost saving over a SEP plan. With a SIMPLE plan you as the employer are able to contribute the maximum amount to your retirement account. You can offer your employees an attractive benefit without having to be the sole contributor to their retirement accounts.
Employee Contributions:
The maximum employee SIMPLE contribution amount for 2013 and 2014 is $12,000. Participants who have attained the age of 50 can contribute an additional $2500 per year bringing their maximum annual contribution amount to $14500 for the years 2013 and 2014.
Employer Contributions:
You have two choices in determining your contributions to the SIMPLE IRA plan:
A SIMPLE IRA plan provides you and your employees with a simplified way to contribute toward retirement. It reduces taxes and, at the same time, attracts and retains quality employees. Compared to other types of retirement plans, SIMPLE IRA plans offer lower start-up and annual costs.
The most you will contribute as an employer is 3% of your employee's gross pay. This is a significant cost saving over a SEP plan. With a SIMPLE plan you as the employer are able to contribute the maximum amount to your retirement account and you can offer your employees an attractive benefit without having to be the sole contributor to their retirement accounts.
SIMPLE IRA plans are easy to set up and run – your financial institution handles most of the details. Employees contribute, on a tax-deferred basis, through payroll deductions. You can choose either to match the employee contributions of those who decide to participate or to contribute a fixed percentage of all eligible employees’ pay. The most you will pay as an employer is 3% of your employee's gross pay. This is a significant cost saving over a SEP plan. With a SIMPLE plan you as the employer are able to contribute the maximum amount to your retirement account. You can offer your employees an attractive benefit without having to be the sole contributor to their retirement accounts.
Employee Contributions:
The maximum employee SIMPLE contribution amount for 2013 and 2014 is $12,000. Participants who have attained the age of 50 can contribute an additional $2500 per year bringing their maximum annual contribution amount to $14500 for the years 2013 and 2014.
Employer Contributions:
You have two choices in determining your contributions to the SIMPLE IRA plan:
- A 2% nonelective employer contribution, where all employees eligible to participate receive an employer contribution equal to 2% of their compensation (limited to $255,000 per year for 2013 and 2014 and subject to cost-of-living adjustments for later years), regardless of whether they make their own contributions.
- A dollar-for-dollar match up to 3% of compensation, where only the participating employees receive matching contributions.
Employer contributions are deductible for the year of the associated payroll provided that the contributions are made by the due date of the tax return. For example, employer contributions made in March of 2014 related to 2013 payroll are deductible on the 201
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