SIMPLE IRA Plan

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SIMPLE IRA Plan

A SIMPLE IRA plan (Savings Incentive Match PLan for Employees) allows employees and employers to contribute to traditional IRAs set up for employees. It is ideally suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.

SIMPLE IRA plans can provide a significant source of income at retirement by allowing employers and employees to set aside money in retirement accounts. SIMPLE IRA plans do not have the start-up and operating costs of a conventional retirement plan.

  • Available to any small business – generally with 100 or fewer employees
  • Easily established by adopting Form 5304-SIMPLE, 5305-SIMPLE, a SIMPLE IRA prototype or an individually designed plan document
  • Employer cannot have any other retirement plan
  • No filing requirement for the employer
  • Contributions:
    • Employer is required to contribute each year either a:
      • Matching contribution up to 3% of compensation, or
      • 2% nonelective contribution for each eligible employee
        • Under the “nonelective” contribution formula, even if an eligible employee doesn’t contribute to his or her SIMPLE IRA, that employee must still receive an employer contribution to his or her SIMPLE IRA equal to 2% of his or her compensation
    • Employees may elect to contribute
    • Employee is always 100% vested in (or, has ownership of) all SIMPLE IRA money

Pros and Cons:

  • Easy and inexpensive to set up and operate
  • Employees share responsibility for their retirement
  • No discrimination testing required
  • Inflexible contributions
  • Lower contribution limits than some other retirement plans

Who Contributes: Employer must contribute and employee may contribute.

Contribution Limits: Total contributions to each employee’s SIMPLE IRA are limited.

Filing Requirements: An employer generally has no filing requirements.

Participant Loans: Not permitted. The assets may not be used as collateral.

In-Service Withdrawals: Yes, but includible in income and subject to a 10% additional tax if under age 59-1/2. Also, if withdrawals are made within the first two years of participation, the 10% additional tax is increased to 25%.

Call Shelly Dodge at 972/539-0002 today to schedule a complimentary consultation to discuss your investment options and to determine if a SIMPLE IRA plan is right for you.

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Investment products and services available only to residents of:  TX (Texas), AR (Arkansas), OK (Oklahoma), LA (Louisiana), CA (California), FL (Florida).

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Neither NEXT Financial Group, Inc. nor its representatives offer tax or legal advice.