SIMPLE IRA

Learn about the SIMPLE IRA.

SIMPLE IRA

The SIMPLE IRA one type of an Individual Retirement Account, and stands for Savings Incentive Match Plan for Employees. It is an employer-provided retirement plan, in that sense similar to other plans such as the 401(k) and 403(b). When compared to those plans, however, the SIMPLE IRA is aptly named as its administration rules are simpler and less costly.

An individual's SIMPLE IRA receives funds from a pretax salary reduction. Such deductions are still subject to taxes of Social Security, Medicare and the Federal Unemployment Tax Act (FUTA). Contribution limits are $10,500 for 2008, and 11,500 for 2009 which is lower than the $15,500 afforded to many other employer-provided retirement plans.

SIMPLE IRA Employer Requirements

An employer desiring to use the SIMPLE IRA may not be currently sponsoring any other retirement plan.

A SIMPLE IRA may only be provided by an eligible employer, which may not have more than 100 employees. There is a grace period of two years for previously eligible employers who have already established a SIMPLE IRA prior to surpassing the 100 employee threshold.

A minimum mandatory contribution from the employer is present with the SIMPLE IRA. This may be either a dollar for dollar match up to 3%, or a flat 2% contribution for employees with at least $5000 compensation that year.

The Employers page details additional requirements, benefits and information for an employer to set up and use a SIMPLE IRA retirement plan for its employees.


Other types of Individual Retirement Accounts (IRAs) include:

Roth IRA - Named after Senator William Roth

Traditional IRA - Includes the functions of the now-obsolete Rollover IRA and Conduit IRA

SEP IRA - Simplified Employee Pension

Self-Directed IRA - The account holder may make investments toward the retirement plan