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SIMPLE IRA
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{{Short description|Type of retirement plan in United States}}A Savings Incentive Match Plan for Employees Individual Retirement Account, commonly known by the abbreviation ”SIMPLE IRA”, is a type of tax-deferred employer-provided retirement plan in the United States that allows employees to set aside money and invest it to grow for retirement. Specifically, it is a type of Individual Retirement Account (IRA) that is set up as an employer-provided plan. It is an employer sponsored plan, like better-known plans such as the 401(k) and 403(b) (Tax Sheltered Annuity plans), but offers simpler and less costly administration rules, as it is subject to ERISA and its associated regulations. Like a 401(k) plan, the SIMPLE IRA can be funded with pre-tax salary contributions, but those contributions are still subject to Social Security, Medicare, and Federal Unemployment Tax Act taxes.WEB,www.irs.gov/Retirement-Plans/SIMPLE-IRA-Plan-FAQs-Contributions, November 13, 2020, Internal Revenue Service, SIMPLE IRA Plan FAQs - Contributions, April 20, 2021,web.archive.org/web/20210420220137/https://www.irs.gov/retirement-plans/simple-ira-plan-faqs-contributions, Contribution limits for SIMPLE plans are lower than for most other types of employer-provided retirement plans as compared to conventional defined contribution plans like Section 402(g), 401(k), 401(a), and 403(b) plans.- the content below is remote from Wikipedia
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Rules
- Only an “eligible employer” may establish a SIMPLE IRA. An eligible employer is one with no more than 100 employees. An employer who has already established a SIMPLE IRA may continue to be “eligible” for two years after crossing the 100-employee limit.
- Employees are not required to make regular IRA contributions to their SIMPLE IRA account.
- A SIMPLE IRA requires a certain minimum contribution from the employer. The employer may either:
- Match the contributions of each employees dollar-for-dollar up to 3% of the employee’s compensation (or a smaller percentage in certain cases); or
- Contribute a flat 2% of the compensation for each employee with at least $5,000 in compensation for the year, regardless of the amount the employee contributes.WEB,www.irs.gov/Retirement-Plans/Choosing-a-Retirement-Plan-SIMPLE-IRA-Plan,web.archive.org/web/20210515122721/https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-simple-ira-plan, May 15, 2021, Internal Revenue Service, Choosing a Retirement Plan: SIMPLE IRA Plan, November 23, 2020, WEB,money.cnn.com/retirement/guide/IRA_SIMPLE.moneymag/, What is a SIMPLE IRA?, CNN Money, CNN,web.archive.org/web/20201203022634/https://money.cnn.com/retirement/guide/IRA_SIMPLE.moneymag/, December 3, 2020, “MEMBERWIDE">
- Employees who are not yet age 50 are allowed to contribute up to $14,000 in 2022.NEWS,www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-simple-ira-contribution-limits, Retirement Topics - SIMPLE IRA Contribution Limits, Internal Revenue Service, November 8, 2021, May 27, 2022, Participants who are age 50 or older are allowed to contribute $17,000 for 2022. These limits are different from the limits that apply to 401(k), 403(b), and 457 plans.WEB,www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits, Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits, Internal Revenue Service, November 5, 2021,
- The SIMPLE plan can technically be funded with either an IRA or a 401(k). There is almost no benefit to funding it with a 401(k), because the lower contribution limits of the SIMPLE are required as is the expensive extra administration of the 401(k).
- An employee is allowed to make a direct rollover from a SIMPLE IRA into a Traditional IRA after at least two years has passed from the date the employee first participated in the plan.
- An employee is allowed to make a direct rollover from an IRA, a 401(k), or a 403(b) into a SIMPLE IRA after two years of participation. An employee is allowed to make a direct rollover from another SIMPLE plan into a SIMPLE IRA during the first two years of participation in a SIMPLE IRA.“SIMPLE IRA Plans for Small Businesses”. Internal Revenue Service. 2020.
Annual contribution limits
{| class=“wikitable sortable“|+Contribution Limits!Year !! Under Age 50 !Age 50 or OlderSee also
References
{{reflist}}Additional references
- WEB, Publication 560: Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans), Internal Revenue Service, 2021,www.irs.gov/pub/irs-pdf/p560.pdf, 8â11,
- BOOK, Littell, David, Tacchino, Kenn, Planning for Retirement Needs, 5th, 2002, The American College, Bryn Mawr, Pennsylvania, 1-57996-039-1,
- {{URLwww.law.cornell.edu/uscode/text/26/408p|Internal Revenue Code Section 408(p)}}
- content above as imported from Wikipedia
- "SIMPLE IRA" does not exist on GetWiki (yet)
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- "SIMPLE IRA" does not exist on GetWiki (yet)
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