SIMPLE IRA Plans

Overview

The Savings Incentive Matching Plan for Employees or SIMPLE IRA plan is a fairly basic, easy, and cost effective plan to administer.  It offers eligible employees of a company the ability to defer a portion of their pay into the plan. The employer has a choice of either matching the contributions at a certain level or making a non-elective contribution on behalf of all eligible employees.

Contribution Limits

• 2007 Salary Deferral Maximum:  100% of compensation up to $10,500.
• Maximum Catch-up Contribution (available to people who are 50 and older): $2,500

Employer Contributions

There are two options in this type of plan:

• Matching Contribution:  The employer must match the deferrals of all eligible employees dollar for dollar up to 3% of compensation.
• Non-elective Contribution:  The employer must contribute 2% of all eligible employees pay during the year.

Administrative Costs

The administrative costs for this type of plan are minimal.  Usually they consist of an annual custodian fee ($10-$35)  for each participant account, and possibly an account set up fee for each account ($10-15).

Other considerations

• Initial eligibility can be restricted up to two years.
• There is no vesting schedule.
• The plan is easy to administer and explain to employees.