Learn Investing Secrets

A Savings Incentive Match Plan for Employees plan, better known as a SIMPLE plan, is an IRA-based retirement plan available to employers with fewer than 100 employees.

Under a SIMPLE IRA plan, an employee can contribute a portion of his pay to his SIMPLE IRA account. Under the 'non-elective' contribution formula, even if an eligible employee doesn't contribute to his SIMPLE IRA, you must still contribute to his account 2% of his salary.

Advantages of the SIMPLE IRA

• Less expensive than a 401(k)

Disadvantages of the SIMPLE IRA

• A special tax penalty of 25% unique to the SIMPLE IRA for withdrawals made within the first two years of opening a SIMPLE plan.

  ---

  Article:
  

  A Savings Incentive Match Plan for Employees plan, subvert known as a SIMPLE plan, is an IRA-based retirement plan idle to employers with fewer than 100 employees.

  Under a SIMPLE IRA plan, an employee can contribute a portion of his pay to his SIMPLE IRA account. An employee can make a maximum contribution of $9,000, ($10,500 if age 50 and over), to his SIMPLE IRA blackmail for 2004. You, the employer, are required to make a contribution for every worker who receives $5,000 or more in compensation.

  You can match up to 3% of the salary for the employees who contribute to their SIMPLE IRA account. You only have to match for those employees who contribute to the plan. In any 2 years out of a 5 year period, backward notification to the employees, you may elect a lower matching contribution percentage but not less than 1% of salary.

  Your action also has the option to select a “non-elective” mandatory unit match of 2% of docket salary for every employee. Under the “non-elective” contribution formula, even if an eligible employee doesn’t contribute to his SIMPLE IRA, you must still contribute to his communique 2% of his salary.

  Advantages of the SIMPLE IRA

  • Less expensive than a 401(k)

  Disadvantages of the SIMPLE IRA

  • A special tax penalty of 25% unique to the SIMPLE IRA for withdrawals made within the first two years of opening a SIMPLE plan. (Congress is considering eliminating this tax).

  • A SIMPLE IRA is much less flexible than a 401(k) plan.

  • Employer must make contributions for all eligible employees.

  • No contributions can be made to other qualified retirement plans.

  • All contributions are immediately vested, meaning all contributions suit right away to the employee.

  • A SIMPLE IRA plan can only be terminated prospectively, youth no earlier than the next gazetteer year. Contributions must continue until the plan is terminated.

  • A SIMPLE IRA must be set up at least 60 days prior to year end. Thus, October 1, is the last day to set up a new SIMPLE IRA for the jot down year.

  • No loans allowed.

  While the SIMPLE IRA make senses under several circumstances, this plan comes with a lot of strings attached. If your goings-on has no employees and you do not expect to hire employees in the near future, consider using a Solo 401(k) with a loan feature instead of a SIMPLE IRA. And, if you have more than 20 employees, look at setting up a regular 401(k) as an alternative.

  To terminate a SIMPLE IRA plan, notify the financial institution that you chose to handle the SIMPLE IRA plan that you will not be making contributions for the next annals year and that you want to terminate the contract or synchronism with it. You must also notify your employees that the SIMPLE IRA plan will be discontinued.

  
  
  The Simple Golf Swing. - eBook for a repeatable and Simple Golf Swing that provides power, accuracy and consistency.
  Starting A Child Daycare. - Complete business package to help you easily and quickly start your own profitable home-based day care business!
  
  
  Article Index: | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27

More Articles: