Attention: SMALL BUSINESS OWNERS
Why not SIMPLE IRA? (It’s simple, no pun intended)

Small business owners may feel providing 401(k) options to their employees is complicated. Many small businesses start shopping for a 401(k) plan before they know their options. In fact, retirement options for a small business are not limited to 401(k). There are also IRA based alternatives.

One such option is a SIMPLE IRA plan. SIMPLE (Savings Incentive Match Plan for Employees) is an easy way to boost your own retirement savings and an inexpensive way to help your employees save for their retirement.

A SIMPLE IRA plan is available to any small business with 100 or fewer employees. Unlike the 401(k), SIMPLE plans offer low administrative costs and employers are not required to file annual financial reports with the government. It’s simplified!

Employer Requirements
As an employer you are required to make one of two types of contributions. A matching contribution is equal to employee’s contributions or a dollar-for-dollar match up to 3% of employee’s salary. The other option is non-elective contributions, a flat 2% contribution rate for each eligible employee. Percentages of the matching contribution can be changed from one year to the next, but you cannot go below 1% and changes can be made for no more than two out of five years.

One thing to note is that SIMPLE can’t be terminated in the middle of a year. Once you start the plan in January are required to continue the plan through December. All matching contributions need to be made for the entire year.

Benefit to the Employer
Like any qualified retirement plans, the contributions you make to your employee’s SIMPLE plan are tax deductible. Employers may be eligible for a tax credit of up to $500 per year for each of the first three years of offering a SIMPLE IRA plan.

Eligible employees, those who earned at least $5,000 in the previous year, can make pre-tax contributions of a maximum of 100% of their salaries, or up to $13,000 in 2019. Those who are 50-years-old or older during the year can elect to make a $3,000 catch-up contribution.
Vesting is automatic.

Benefit to the Employee
Employees always own 100% of the money in their SIMPLE plan. Employees can generally direct their own investments. Therefore, employees have more sense of control in a SIMPLE plan. This is a good way to encourage them to get more involved in their own retirement plan.

Non-profit organizations and government entities such as trade associations, advocacy groups, charities, country clubs, business leagues and chambers of commerce also may establish a SIMPLE IRA.

Get Started
All retirement plan types have advantages and disadvantages. Connect with one of our fiduciary advisors to determine if an IRA-based plan or a 401(k) fits your organization.