There’s a retirement plan available to small business owners that few people are familiar with. It’s called a Savings Incentive Match Plan for Employees, or “SIMPLE” IRA.

What makes these plans so attractive usually boils down to one word: Cost

The more commonly used 401(k) plans typically have expensive annual testing requirements to ensure they remain in compliance with the rules of ERISA. A SIMPLE IRA plan, however, avoids these testing requirements, and therefore has very low administrative fees compared to a 401(k) plan, potentially saving the business owner thousands of dollars each year in fees. In fact, picking the right provider for your SIMPLE IRA plan can result in no on-going administrative fees for the employer.

As usual though, saving money comes with a compromise. Here’s a general overview of the features of a SIMPLE IRA that you’ll want to know:

1. Must have fewer than 100 employees

2. The employer is required to provide either:

a. 3% matching contribution, or

b. 2% contribution to all employees (regardless of participation)

3. All contributions are 100% vested

4. The contribution limits are lower in a SIMPLE IRA than in a 401(k) plan

5. Taking money out of a SIMPLE IRA plan within the first 2 years can result in penalties that are larger than 401(k) plans


Call us today if you are considering setting up a retirement plan for your small business.  We can help you determine which plan is right for you and your business.

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