| Account Description |
As an employer, you can offer a
salary deferral plan for your employees easily and
affordably.
A SIMPLE IRA allows you to offer a salary deferral plan
minus the cost or administrative responsibilities
associated with traditional 401(k) plans. |
| Eligibility to Contribute |
- As an employer you can contribute for yourself
and your employees at any age.
- Works well for companies with 25 or fewer
employees.
|
| Maximum Annual Contribution |
- Employer (required): Either
dollar-for-dollar matching up to 3% of compensation,
or 2% of compensation to all eligible employees
- Employee: up to 100% of
compensation or $10,500 ($13,000 age 50 and older
for 2007)
|
| Tax-Deductible Contributions |
- Employers can deduct contributions from federal
taxable income.
- Employee can make pre-tax contributions.
|
| Taxation of Earnings and Withdrawals |
Tax-deductible contributions and
earnings are taxed as ordinary income when withdrawn. |
| Types of Investments |
Stocks, bonds and mutual funds
available through any investment firms brokerage
account. |
| Withdrawal Penalties |
25% IRS early withdrawal penalty if
withdrawn during the first two years after the SIMPLE
IRA is opened. After that, 10% early withdrawal applies
before age 59 1/2 unless exception applies.
Exceptions:
- Death
- Disability
- Medical expenses in excess of 7.5% of AGI
- Health insurance premiums if unemployed for 12
consecutive weeks
- Qualifying higher education expenses
- Qualifying first time home purchase ($10,000
lifetime limit)
- Qualified military reservist
- Substantially equal payments made over life
expectancy
|
| Required Withdrawals |
Must begin at age 70 1/2. |
| Deadline to Set Up and Fund |
- Must establish by October 1 of the first plan
year.
- Salary Deferrals must be sent in monthly.
- Employer contribution may be made through the
business’ tax filing due date plus extensions.
|
| Commissions and Fees |
Varies by investment firm. |
