Simple Plans

SIMPLE PLANS, also known as Savings Incentive Match Plans for Employers are available for businesses with 100 or fewer eligible employees that do not currently maintain any other retirement plan.  They are easier to establish than other retirement plans and available to sole proprietors, partnerships, corporations, and "S" corporations.

Employee Salary Deferral

With the SIMPLE IRA., each employee has their own IRA.  They can make elective deferrals of up to 100% of compensation not to exceed $11,500 for 2012.  Employees above age 50 can contribute an additional $2,500 for for 2012.

Employer Contributions

The employer will also make a contribution to the IRA.  Employers have the option  to match the employee's contributions dollar for dollar up to 3% of compensation (maximum $11,500 for the 2012 plan year).  This match can be reduced to as low as 1% in any two out of five years.

Or, they can use an alternative matching contribution method by making a flat 2% contribution of each employee's compensation, up to $5,000 for the 2012 plan year.

Set Up

The SIMPLE IRA is easy to establish and must be set up by October 1.  Most brokerage and mutual fund companies have standard plans that they offer.