SIMPLE IRA SIMPLE IRA stands for Savings Incentive Match Plan for Employees. An Individual Retirement Account (IRA) is a type of employer-provided plan which is a form of salary reduction plan structured for qualifying small businesses so they may offer retirement to their employees. Businesses with 100 employees or less, earning $5,000 or more a year that do not offer any other retirement benefits plan qualify to offer a SIMPLE IRA. Self-employed workers can also qualify to create this type of IRA account. Employers must make a matching contribution or a fixed "non-elective" contribution to their employees' accounts every year. If the business owner chooses matching contributions, they must match the amount the employees’ contribution up to 3 percent. The employer may choose to make a non-elective contribution of 2 percent of the wages for each eligible employee. Are you or someone you know considering a SIMPLE IRA and need the help of a qualified CPA? Contact an experienced CPA to make an informed decision about your retirement plan today. A SIMPLE IRA is a qualified plan, very similar to other better known retirement plans, but it offers easier rules and is less expensive to administer. The plan is funded by a pretax salary reduction and the contribution limits are lower than most other types of employer-provided retirement plans. Types of retirement plans: Contributions to your traditional IRA can be made from your simple IRA at any time during a certain year or by the due date for filing your tax return for that year, excluding extensions. SIMPLE IRA plans can only be set up by an eligible employer. The plan has to have a minimum contribution from the employer to qualify. There is a catch-up provision available for participants over age 50. The permissible catch-up contribution is $2,500. A SIMPLE IRA cannot be rolled over to a traditional IRA without a two year waiting period. You may contribute up to $10,000 per year into the account if you are younger than 50, if you are older you can contribute up to $12,500. Your contributions are excluded from taxable pay on your W-2 and can not be considered for income tax withholding, but Social Security taxes do have to be paid on those earnings. The employer chooses the financial institution into which the deposits are made but the employees have the right to transfer the funds to the financial institution of their choice without fees or penalty. Are you or someone you know considering a SIMPLE IRA and need the help of a qualified CPA? Contact an experienced CPA to make an informed decision about your retirement plan today.
|
