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:
For individuals, SIMPLE means:
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 are indexed for individuals age 50 and under. Contributors age 50 or older can make catch-up contributions of up to $2,500 per year. One hundred percent of earned income can be contributed. All contributions must be made through salary withholding.
For more details, talk to an Erie Insurance Agent, who can explain all the workings of the SIMPLE IRA.
*Life insurance and annuity products are not available in New York. Refer to our Disclaimer for additional information.