SIMPLE IRA
(Savings Incentive Match Plan for Employees)
A retirement plan 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)
$16,000 for 2024 ($15,500 for 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 $345,000 for 2024/$330,00 for 2023).
Annual salary deferral limits (age 50 or over at any time during the calendar year)
$19,500 for 2024 ($19,500 for 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 $345,000 for 2024/$330,00 for 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) for that year.
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 generally 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 during the 2 year period beginning on the date on which the participant first participated in any SIMPLE IRA plan maintained by their employer, the 10% early distribution penalty is increased to 25%.
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