SIMPLE Plans
SIMPLE (Savings Incentive Match Plan for Employees) Plans are an option 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 or the annual IRS dollar maximum.
• Employers must make an additional contribution in one of two ways:
  1. Match participant deferrals on a dollar-for-dollar basis, up to 3% of the participant’s income.
  2. 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 would be subject to a 25% penalty during the employee’s first two years of participation in the plan. After this time, they would be 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.