SIMPLE IRA

	The SIMPLE IRA
	The Benefits of a SIMPLE IRA
	What is SIMPLE IRA eligibility?
	What is the maximum that can be contributed?
	What are contribution options and limits?
	What is the deadline for setting up a SIMPLE IRA Plan?

The SIMPLE IRA
SIMPLE stands for Savings Incentive Match Plan for Employees, it is a written arrangement that provides a simplified way to make contributions to provide retirement income for employer and employees. Under a SIMPLE IRA, employees may choose whether to make salary reduction contributions to the SIMPLE plan. In addition, an employer will contribute matching or nonelective contributions on behalf of eligible employees.

The Benefits of a SIMPLE IRA
For the employer, a SIMPLE IRA is a benefit plan that can help attract and retain valuable employees. The plan is easy to establish and administer, and there is no annual government reporting required (no annual 5500 filing). The burden of funding the plan is shared by employer and employee, and the employer may take a tax deduction for the entire amount contributed on behalf of each employee. For the employee, the self-directed SIMPLE IRA offers the ability to save more towards retirement than through an IRA. Contributions are made on a pretax basis and will accumulate tax-deferred until distributed from the plan.

What is SIMPLE IRA eligibility?
Employers are eligible to establish and maintain a SIMPLE plan only if the employer:

has no more than 100 employees (including self-employed individuals) who earned $5,000 or more in compensation during that year; and;
does not maintain another qualified retirement plan, 403(b), or SEP at the same time.

What is the maximum that can be contributed?
Employees can defer all or part of their salary. The following table summarizes:

Scheduled Increases to the SIMPLE Salary Deferral Amount
Year	Under the age of 50	Age 50 and over*
2006	$10,000	$12,500
2007~	Adjusted for cost-of-living	Adjusted for cost-of-living
Participants who have attained age 50 before the end of the year can make additional contributions to a SIMPLE IRA

What are contribution options and limits?
The SIMPLE IRA has a mandatory employer contribution requirement. This contribution requirement can generally be made as follows:

The employer can make a dollar-for-dollar matching contribution on the first 3% of compensation that the individual elects to defer, or;
The employer can make a nonelective contribution of 2% of each employee's compensation (up to $205,000) for all eligible employees.

What is the deadline for setting up a SIMPLE IRA Plan?
SIMPLE IRA Plans must be established by October 1st to make a contribution for the current year.

*This information should not be construed as providing tax or legal advice. Please consult with your tax advisor or attorney regarding your individual situation.

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