A SIMPLE IRA, or Savings Incentive Match Plan for Employees Individual Retirement Account, is a type of tax-deferred employer-provided retirement plan in the United States. It allows employees to set aside money for retirement and offers benefits for both employers and employees. Here are some key points about SIMPLE IRAs:
- It allows employees and employers to contribute to traditional IRAs set up for employees.
- It provides small employers with a simplified method to contribute toward their employees and their own retirement savings.
- It is designed for self-employed individuals, small businesses, or any business with 100 or fewer employees.
- The plan can be funded with pre-tax salary contributions, but those contributions are still subject to Social Security, Medicare, and Federal Unemployment Tax Act taxes.
- Contribution limits for SIMPLE plans are lower than for most other types of employer-provided retirement plans.
- Only an "eligible employer" with no more than 100 employees may establish a SIMPLE IRA.
- A SIMPLE IRA requires a certain minimum contribution from the employer, and employees are not required to make regular IRA contributions to their SIMPLE IRA account.
- It offers an easy and low-cost way for businesses to contribute to a retirement plan while offering one to employees as well.
In summary, a SIMPLE IRA is a retirement savings plan that provides a straightforward and cost-effective way for small businesses and self-employed individuals to save for retirement and offer retirement benefits to their employees.
