SIMPLE IRA

(Savings Incentive Match Plan for Employees)

A retirement plan is similar in some ways to a 401(k) 

  • Easier and less expensive to administer than a typical qualified retirement plan
  • For businesses with 100 employees or fewer
  • Pre-tax employee salary deferrals and federal tax deductible employer contributions
  • Use the Small Business Selector to find a plan

Annual salary deferral limits (if under age 50 for entire calendar year)

$15,500 in 2023

The employer/plan sponsor is required to (a) match each participant's salary deferral contribution on a dollar-for-dollar basis up to 3% (or a lesser percentage under certain limited circumstances) of the participant's compensation (or net earnings from self-employment), or (b) make nonelective contributions of 2% of each eligible employee's compensation (with compensation taken into account for this nonelective contribution capped at $330,000 in 2023). 

Annual salary deferral limits (age 50 or over at any time during the calendar year)

$19,000 in 2023

The employer/plan sponsor is required to (a) match each participant's salary deferral contribution on a dollar-for-dollar basis up to 3% (or a lesser percentage under certain limited circumstances) of the participant's compensation (or net earnings from self-employment), or (b) make nonelective contributions of 2% of each eligible employee's compensation (with compensation taken into account for this nonelective contribution capped at $330,000 in 2023). 

Why a SIMPLE IRA?


Eligibility information

Available for self-employed individuals and business owners with fewer than 100 eligible employees


Flexibility

Diversify with a choice of mutual funds, ETFs, stocks, and more


Reduced administrative requirements

For example, IRS Form 5500 filing is generally not required

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SIMPLE IRA FAQs

See all FAQs

Already have a SIMPLE IRA? Contribute now.

Can a business owner establish a SIMPLE IRA if currently sponsoring another retirement plan?

No. If a business owner currently maintains another employer-sponsored retirement plan, they may not establish a SIMPLE plan for the same tax year when contributions were made to that plan.

Do employer contributions have to be made to all eligible employees?

It depends. If a non-elective employer contribution option is chosen, contributions have to be made to all eligible employees whether they choose to participate in the plan or not. However, if a matching contribution option is chosen, contributions are only made to employees who are participating in the plan (i.e. making salary deferral contributions).

Can an employer or employee make contributions to a SIMPLE IRA while contributing to a Traditional IRA?

Yes. An individual may have both accounts. However, since an individual will be considered an active participant in an employer-sponsored retirement plan, some or all of the contributions to a Traditional IRA may not be deductible. Refer to the Contribution Limits and Deadlines table for more information.

What are the basic distribution rules for a SIMPLE IRA?

Generally distributions from a SIMPLE IRA are subject to the same distribution rules as a Traditional IRA. SIMPLE IRA distributions may be taken at any time and are taxable in the year distribution occurs. Withdrawals taken prior to age 59½ are subject to an additional 10% early distribution penalty. However, if a distribution from a SIMPLE IRA is taken within 2 years of first participation in the plan, the 10% early distribution penalty is increased to 25%.

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