Savings Incentive Match Plan for Employees (SIMPLE IRA)
A Simple IRA plan is a retirement plan for employees who work for a small business that has 100 or fewer employees who earn at least $5,000 a year.
Funds for a Simple IRA plan come from voluntary employee contributions and mandatory matching or non-elective contributions by the employer.
In 2023, eligible employees may defer up to $15,500 of their wages. Employees age 50 and over can make an additional “catch-up” contribution of $3,500. Limits are indexed for inflation.
Distributions of a Simple IRA are generally subject to the regular IRA rules. Unless an exception applies, if you withdraw money from your Simple IRA before age 59.5, you will pay a 10% penalty. If you withdraw money during the first two years of enrollment (and are under 59.5), your early distribution penalty is 25%.
Some of the advantages of participating in a Simple IRA:
- Your before-tax contributions reduce your current taxable income through salary reduction.
- You don’t pay state and federal taxes on contributions and earnings until you withdraw the money.
- Your employer will match your contributions, dollar-for-dollar, up to 3% percent.
- You are immediately 100% vested in employer contributions.
- You contribute through automatic payroll deductions.
For more information, visit the IRS website at: