Simple IRAs

CDs and IRAs

Simple IRAs

Established by employers with 100 or fewer employees* to help them save for the future, a SIMPLE IRA (Savings Incentive Match Plan for Employees) is a salary-deferral retirement plan that allows participants to decide how much they want to save for retirement. It offers benefits to business owners and their employees providing financial savings and a secure future.

 

Features

Pre-tax contributions are deducted from employee’s salary each pay period.

Reduces taxable income for participating employees.

Employees can take distributions at any time**.

Contributions qualify as a business expense for employers resulting in tax savings.

Businesses earn tax credit on establishing the plan at startup and for the next two tax years.

Eligibility

Employers are required to contribute to with matching funds or a fixed, non-elective contribution.

Employee deferral must contribute no later than 30 days after the end of the month in which they were withheld from their pay.

Non-elective contributions must be made by the due date (including extensions) of the employer’s tax return for the year in which the SIMPLE calendar year ends.

Early withdrawal (within two years) results in 25% penalty tax. Withdrawal before the age of 59½ results in a 10% tax penalty.

Maximum Contribution

Contribution limits for a SIMPLE IRA are subject to the cost of living adjustments (COLAs).

2024 Maximum Contribution: $16,000 to cost of living adjustments (COLA).

2024 Maximum Contribution for IRA holders 50+: $19,500.

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*Must have received at least $5,000 in compensation (including elective deferrals under the SIMPLE plan) from the company for the preceding calendar year. Employers currently maintaining another employer sponsored retirement plan (i.e. SEP IRAs, Keogh, 403(a), 403(b), 401(k), 408, 457, or 501) are not eligible.

**Must begin taking distributions at age 73.

The above information is provided for educational purposes and is not intended as tax advice. Please consult a tax professional.