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
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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