Simple IRA (Savings Incentive Match Plan for Employees)

A Simple IRA plan makes it possible for small businesses to provide a low-cost retirement plan for their employees. Simple IRAs can provide a significant source of income at retirement by allowing both employers and employees to set aside money into the plan. A Simple IRA is available to any small business with 100 or fewer employees.

In A Simple IRA, the employer is required to contribute each year either a matching contribution up to 3% of compensation, or a 2% non-elective contribution for each eligible employee. Under the “non-elective” contribution formula, even if an eligible employee doesn’t contribute to their Simple IRA, that employee must still receive an employer contribution to their account equal to 2% of their compensation up to the annual income limit. In a Simple IRA, employees may also contribute to the plan, and the employee is always 100% vested.