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SIMPLE IRAs
Savings Incentive Match Plan for Employees (SIMPLE) IRAs provide employers and employees with immediate tax deductions and allow earnings to compound tax deferred until they are withdrawn. They are easy to set up and require little or no administrative cost.
Eligible employees elect a percentage of pay to be contributed
from each pay period. Employees may contribute up to the lesser
of $10,500 (as adjusted for inflation for 2008), plus an age
50+ catch-up of $2,500 (as adjusted for inflation for 2008)
or 100% of earned income. Employers are generally required to
either match employee contributions up to 3% of employee pay
or contribute 2% of each eligible employee’s pay.
Any employer may establish and maintain a SIMPLE IRA provided both of the following requirements are met:
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Last calendar year, the employer had no more than 100 employees who earned $5,000 or more in compensation during the year
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The
employer does not maintain during any part of the calendar
year another qualified plan (Profit Sharing, Pension,
401(k), etc.) to which contributions are made or benefits
accrued.
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