SIMPLE Retirement Plans
What are SIMPLE Retirement Plans?
Effective January 1, 1997, a new type of employer-sponsored retirement plan became available—the Savings Incentive Match Plan for Employees (SIMPLE). SIMPLE plans can be established by employers with 100 or fewer employees who received at least $5,000 each in compensation from the employer in the preceding year, provided the employer does not maintain another qualified retirement plan, 403(b) annuity plan, 501(c)(18) trust, SEP, or governmental plan. An employer who contributes to a collectively bargained plan for some employees may set up a SIMPLE 401(k) plan or SIMPLE IRA for other employees; however, those employees who participate in the collectively bargained plan still count towards the 100-employee limit.
If an employer goes over the 100-employee limit as its business expands, the employer may continue to maintain the SIMPLE plan for another two years.
SIMPLE plans may be set up by self-employed persons as well as corporations.
Self-employed persons receiving earned income from an employer count as "employees" for determining the 100-employee limit.
SIMPLE plans are intended to replace salary reduction SEPs (SARSEPs), which may no longer be established after December 31, 1996.
SIMPLE plans are not subject to the anti-discrimination or top-heavy rules usually applicable to tax qualified retirement plans.
SIMPLE retirement plans can be established in two ways:
Simple IRAs
Simple 401(k) Plans