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Savings Incentive Match Plan for Employees (SIMPLE) IRA
The Savings Incentive Match Plan for Employees (SIMPLE) IRA is
a tax-qualified retirement plan for businesses (C Corps, S Corps, Partnerships,
and Sole Proprietorships) with fewer than 100 employees. It enables
eligible firms to offer 401k-type benefits without complicated rules
or high administrative expenses. It enables eligible employees to make
tax-deductible contributions beyond what a traditional IRA allows.
For businesses, SIMPLE means:
- No top-heavy rules.
- No discrimination testing.
- No Form 5500 filings each year.
- Fully deductible contributions (subject to certain limits).
For individuals, SIMPLE means:
- Contribution limits far above what a traditional IRA allows.
- Complete investment control.
- Some level of employer contributions.
- Full and immediate vesting of employer contributions.
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Required employer contributions can be made on either a 3 percent “elective” basis
or a 2 percent “non-elective” basis.
Under the elective method, the employer is required to contribute only
if an employee “elects” to contribute. Under the non-elective
method, the employer contributes a flat percentage of compensation (2
percent minimum) for everyone regardless of any personal participation.
SIMPLE contribution limits for individuals are listed below. One hundred
percent of earned income can be contributed. All contributions
must be made through salary withholding.
| Year |
Under Age 50 |
Over Age 50 - Catch-up Contribution |
2007 |
$10,500 |
$2,500 |
2008 - 2010 |
Indexed |
$2,500 |
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For more details, talk to an
Erie Insurance agent, who can explain all the workings of the SIMPLE IRA.
*Erie Family Life products are not available in all states.
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