SIMPLE IRAs

At Edward Jones, we'll take the time to make sure the SIMPLE IRA (Savings Incentive Match Plan) is the right choice for your company. It's a low-cost option that can be helpful for employees.

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Even with an acronym like SIMPLE, the Savings Incentive Match Plan for Employees IRA can be intimidating. However, this effective retirement plan is easy for employers and employees to use.

A SIMPLE IRA allows your employees to contribute to the plan through salary deferrals. You're also responsible for making contributions to the plan. Consider this plan if:

  • You're looking for a primarily employee-funded plan with low required employer contributions.
  • You have 100 or fewer employees who have earned at least $5,000 for the previous year.
  • You don't maintain another retirement plan during any part of the calendar year.

SIMPLE IRA highlights

A SIMPLE IRA is only available to small businesses of 100 employees or fewer, including business owners and self-employed individuals.

Employers can either:

  • Match up to 3% of employee contributions up to $15,500 or if age 50 $19,000, for 2023 tax year.
  • Contribute up to 2% regardless of employee contributions with a maximum compensation of $330,000 for 2023.

Benefits of a SIMPLE IRA include:

  • Simple administration that can lead to cost savings.
  • Low contributions requirements from the employer.

SIMPLE IRA contribution rules and features

  • Participants may contribute on a pretax basis or Roth basis, up to the annual limit of $15,500 for 2023.
  • Individuals age 50 or older may make catch-up contributions for 2023 up to $3,500 for a total of $19,000.
  • Employer contributions are tax-deductible.
  • All contributions are 100% vested to the employee.
  • Employees of any age may participate in the plan.
  • A 25% penalty tax may apply if assets are withdrawn within two years of the participant's first contribution.

Deadlines

SIMPLE IRAs have setup deadlines and contribution deadlines.

  • Setup deadline:
    • A plan cannot have an effective date later than Oct. 1 for current-year contributions.
  • Contribution deadline:
    • You must make contributions by your business's tax-filing deadline.
    • You must deposit salary deferral contributions up to 30 business days after the end of the month they were deferred.

How we can help

If you're looking for a low-cost retirement plan for your employees, make sure to consider a SIMPLE IRA. Your local Edward Jones financial advisor can help you explore your options.