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.
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- A 25% penalty tax may apply if assets are withdrawn within two years of the participant's first contribution.
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.