SIMPLE IRA - Savings Incentive Match PLan for Employees.
SIMPLE IRA plans are most commonly used in start up companies with less than 100 employees. There is no fee to open the accounts and there are no administrative fees. The plan is setup by opening a SIMPLE IRA for each participant at any brokerage firm such as TD Ameritrade.
The employer is required to make a contribution as a matching contribution of up to 3% of employee compensation or a 2% nonelective contribution for each eligible employee.
Under the “nonelective” contribution formula, even if an eligible employee doesn’t contribute to his or her SIMPLE IRA, that employee must still receive an employer contribution to his or her SIMPLE IRA equal to 2% of his or her compensation. The employee is always 100% vested in their SIMPLE IRA.
The maximum amount that an employee can put into a SIMPLE IRA is $11,500. Employees over the age of 50 can contribute an additional $2,500 per year under a catch up provision.
In order to participate in a SIMPLE plan an employee including a self employed individual who received earned income must have earned at least $5,000 in compensation during any two years before the current calendar year and is expect to receive at least $5,000 during the current calendar year.
It is great that you are choosing a retirement plan but remember that you should choose your investment options just as wisely. Pay close attention to price vs. performance. For every percent that you spend in fees, that is less money available to you and your employees at retirement.
Visit the IRS website for more information or call us at 678.521.0680 ext1.