Simple IRA Basic Plan

A SIMPLE IRA Plan is one type of US employer-provided retirement plan. SIMPLE IRA stands for Savings Incentive Match Plan for Employees Individual Retirement Account. It is similar in some ways to other employer sponsored retirement plans but is simpler and lower to establish in terms of administrative costs.

How It Works?

The SIMPLE IRA Plan can be established by a small business owner having less than a hundred employees. When establishing the SIMPLE IRS, the business should not have any other type of retirement plan. Establishing it can be as easy as completing a form or two, making it quite convenient for small businesses.

Contribution to SIMPLE IRA’s are usually lower than other types of employer sponsored retirement plans. The employer matches the contribution of an employee into the plan for up to three percent of the employee’s yearly salary. The employer may also opt to contribute to the plan as much as two percent of the employee’s annual salary without the employee contributing to it.

The employer also partners its retirement plan to a reputable financial institution which handles investment for the funds. The financial institution provides investment options for the employees to choose from. The employees choose from the ones that suite them best.

Advantages

SIMPLE IRA’s offer several advantages for the small business owner as well as for the employees working for them. This type of retirement plan is fairly easy to run and as well as set up. All it requires is a call to a reputable financial institution in the area and filling up the simple forms and requirements.

Because of its simplicity in terms of set up, administrative costs are lower than the more complex retirement plans. Contributions are also tax deferred and can be deducted from the payroll.

The SIMPLE IRA provides small businesses with a convenient and easy means to provide a retirement plan for their own employees as an added benefit for working there.

 

Posted by Ardent Editor on Sep 19 2008 in 401k & Company Plans

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