Savings Incentive Match Plan for Employees (SIMPLE) IRA

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 without 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 100 or fewer employees earning at least $5,000 in compensation and desire for a simple low cost retirement plan.

Maximum Annual Contribution 

• Employer (required): Either dollar-for-dollar matching up to 3% of compensation, or 2% of compensation to all eligible employees. Beginning on 1/1/2024, employers may make an optional, additional contribution up to the lesser of 10% of compensation or $5,000 (indexed for inflation). 
• Employee: Up to 100% of compensation or $16,000 for 2024, not to exceed 100% of compensation (for those age 50 and over the limits increase to $19,500 for 2024)

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Tax-deductible contributions and earnings are taxed as ordinary income when withdrawn.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, mutual funds and Advisory Products available through a Wells Fargo Advisors brokerage account.

Withdrawal Penalties

There is a 25% IRS additional tax if withdrawn prior to two years from the first deposit into the participants account. After that, a 10% additional tax applies before age 59½ unless exception applies.

Exceptions: 

• Death
• Disability
• Medical expenses in excess of 10% 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 periodic payments made over life expectancy
• Involuntary IRS levies
• Conversion to a Roth IRA
• Up to $5,000 for qualified adoption / birth expenses
  

Required Withdrawals

Beginning in tax year 2023, the age to start Required Minimum Distributions (RMDs) has been modified to age 73 (Does not affect participants who turned age 72 on or before 12/31/2022.).

Deadline to Set Up and Fund

• Must establish by October 1 of the first plan year.
• Salary Deferrals must be deposited as soon as possible, but no later than 30 days after the end of the month in which the amount would otherwise have been payable to the employees in cash.
• Employer contribution may be made through the business’ tax filing due date plus extensions.

Commissions and Fees

Vary by account and investment option
 

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