Savings Incentive Match Plan for Employees (SIMPLE) IRA

As an employer, you can offer a salary deferral plan for your employees easily and affordably. 

A SIMPLE IRA allows you to offer a salary deferral plan minus the cost or administrative responsibilities associated with traditional 401(k) plans.

Eligibility to Contribute

  • As an employer you can contribute for yourself and your employees at any age.
  • Works well for companies with 100 or fewer employees and desire for a simple low cost retirement plan.

Maximum Annual Contribution 

  • Employer (required): Either dollar-for-dollar matching up to 3% of compensation, or 2% of compensation to all eligible employees 
  • Employee: Up to 100% of compensation or $12,500 for 2015 (for those age 50 and over the limits increase to $15,500 for 2015)

Tax-Deductible Contributions

  • Employers can deduct contributions from federal taxable income.
  • Employee can make pre-tax contributions.

Taxation of Earnings and Withdrawals

Tax-deductible contributions and earnings are taxed as ordinary income when withdrawn.

Types of Investments

Stocks, bonds, mutual funds and Advisory Products available through a Wells Fargo Advisors brokerage account.

Withdrawal Penalties

25% IRS early withdrawal penalty if withdrawn during the first two years after the SIMPLE IRA is opened. After that, 10% early withdrawal applies before age 59½ unless exception applies.

Exceptions: 

  • Death
  • Disability
  • Medical expenses in excess of 7.5% of AGI
  • Health insurance premiums if unemployed for 12 consecutive weeks
  • Qualifying higher education expenses
  • Qualifying first time home purchase ($10,000 lifetime limit)
  • Qualified military reservist
  • Substantially equal payments made over life expectancy

Required Withdrawals

Must begin at age 70½.

Deadline to Set Up and Fund

  • Must establish by October 1 of the first plan year.
  • Salary Deferrals must be deposited within 30 days after the end of the month in which the amount would otherwise have been payable to the employees in cash.
  • Employer contribution may be made through the business’ tax filing due date plus extensions.

Commissions and Fees

Vary by account and investment option
 

Interested in learning more about SIMPLE IRA plans?
Call us at 1-877-493-4727

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