3 Weeks to Startup by Tim Berry

Author:Tim Berry
Language: eng
Format: epub
Publisher: Entrepreneur Press
Published: 2011-03-14T04:00:00+00:00

Savings Incentive Match Plan for Employees (SIMPLE)

SIMPLE plans are an attractive option for small-business owners. With these plans, you can choose to use a 401(k) or an IRA as your retirement plan.

A SIMPLE plan is just that—simple to administer. This type of retirement plan doesn’t come with a lot of paperwork and reporting requirements.

You can set up a SIMPLE IRA only if you have 100 or fewer employees who have received $5,000 or more in compensation from you in the preceding year. Generally, the employer must make contributions to the plan by either matching each participating employee’s contribution, dollar for dollar, up to 3 percent of each employee’s pay, or by making an across-theboard 2 percent contribution for all employees, even if they don’t participate in the plan, which can be expensive.

The maximum amount each employee can contribute to the plan is $10,000 for 2008. After that, the amount will be indexed for inflation. Participants in a SIMPLE IRA who are age 50 or over at the end of the calendar year can also make a catch-up contribution of an additional $2,500 in 2008.

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