Intro to SIMPLE IRAs
The most complicated part of the Savings Incentive Match Plan for Employees (SIMPLE) of Small Employers may be the name.
That’s probably why everyone calls it a “SIMPLE IRA.” These plans were designed with small businesses in mind. True to their name, SIMPLE IRA plans are easy to set up, and employee notices and disclosure requirements are minimal.
The ease of set-up and low compliance demands make a SIMPLE IRA plan appealing. Deciding if a SIMPLE is a good move for your business should be based on your specific circumstances and needs. Here at COUNTRY Trust Bank, we'd be happy to help you determine which type of plan is right for you.
Talk to a COUNTRY Financial representative to get started.
Who it's for
The two big pluses to SIMPLE IRA plans are that they have a low start-up and annual cost and they’re just simpler to operate than most other plans.
Sole Proprietor, Freelancer, Small Business, Not-For-Profit
You have two basic requirements to qualify to have this type of plan:
1. You can’t have more than 100 employees who earned $5,000 or more during the preceding calendar year.
2. You can’t have another active retirement plan during the current calendar year.
That’s it! You might consider a SIMPLE if you’re a: business with fewer than 100 employees, not-for-profit organization, sole proprietor, independent contractor or freelancer.
How it works
How do employee contributions work?
Building a nest egg for retirement starts with contributing to the plan.
- Unlike most other retirement plans, with a SIMPLE IRA, contributions of highly compensated employees or owners aren’t limited by contributions of non-highly compensated employees.
- In 2016, each participant can contribute as much as 100% of pay up to $12,500.
Am I required to contribute?
As the employer, you’re required to make contributions. You do, though, have a choice between two contribution formulas:
- 2% of pay for all eligible employees, or
- Match the contributions of only the employees who participate. The match is dollar-for-dollar up to 3% of the participant’s pay.
Both employer and employee contributions are tax deductible, and earnings are tax deferred.
Who can participate?
Participation rules are fairly flexible.
- You can exclude employees covered by a collective bargaining agreement and those who are nonresident aliens.
- You aren’t required to impose any service or age requirements. You do, though, have to open up participation to employees who earned $5,000/year from you in any two prior years (preceding the current calendar year), and are reasonably expected to earn $5,000 in the coming year
You can be less restrictive than these two requirements, but not more.
SIMPLE plans don’t have provisions for loans or hardship withdrawals. Participants can, though, withdraw any or all of their money at any time. They will, of course, be subject to applicable taxes and penalties, including an increased 25 percent penalty for early distributions within the first two years after an employee begins participating.
Leave it to the Pros
We’ve made the simplicity of a SIMPLE IRA even simpler.
That’s because these types of IRA accounts enjoy the benefit of having our team of investment professionals invest the money for your employees' accounts. The people who select investments for your plan all hold, or are working to obtain, the Chartered Financial Analyst (CFA®) designation – considered the pinnacle of investment educational attainment – and/or have advanced business degrees.
COUNTRY Financial has a long history of helping clients save for their futures and we can help you invest for your future retirement too.
Call us at 855-535-PLAN (855-535-7526) to find out how we can help you!
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Investment management, retirement, trust and planning services provided by COUNTRY Trust Bank®. Please see our Terms & Conditions for more information about COUNTRY Trust Bank and its affiliates.
COUNTRY Financial® and our representatives cannot give tax advice. Any information we provide reflects our understanding of current tax laws, which are subject to change and reinterpretation. See your tax advisor regarding your personal circumstances.