The Features of a Simple Retirement Plan

There’s nothing like preparing for your future and living in a life of bliss, especially in your older years. While living in financial security is the dream, it takes years of planning and preparation to enjoy your retirement. With the help of a Simple Retirement Plan, you can help yourself set up your future.

There are many business owners that help their employees gain access to these retirement benefits with the aid of a Simple Retirement Plan. Besides its less complicated rules and administration, it also offers a wide variety of key benefits that employees are sure to enjoy in the long run.

If you are looking for a savings vehicle that you can offer to your employees, you should look into a Simple Retirement Plan and its extensive range of features. Here’s why.

The Features of a Simple Retirement Plan


What is a Simple Retirement Plan?

A SIMPLE (Savings Incentive Match Plan for Employees) Individual Retirement Account (IRA) is a type of tax-deferred retirement savings accounts. These plans can be initiated by employers or voluntarily set up by self-employed individuals.

Benefits of a Simple Retirement Plan

One of the main benefits of this tax-deferred retirement scheme is that it allows employees to hold off a portion of their salaries and instead, allocate these amounts towards these plans. In turn, the portion of these tax-deferred savings is given the chance to grow faster and more effectively.

However, keep in mind that the taxes will only be levied once these distributions are touched upon your retirement.

Another key feature of this retirement scheme is that it takes pride in doing without the bureaucracy and strict requirements that otherwise come with qualified plans. 

Without non-discrimination rules and top-heavy testing, vesting schedules, and even tax reporting at every level, employers are more likely to avail of these plans because of its relatively easy approach.

Unlike qualified plans, employers aren’t limited to hiring specially trained or skilled staff, thereby allowing them to cater to a wider range of people under their roof.

Simple Retirement Plan – Key Highlights

A key highlight of a Simple Retirement Plan is that this type of account requires employers to match employee contributions

These matched employer contributions are also without ties or strings attached. Should employees choose to leave, regardless of tenure, the amount in their account are solely theirs.

Both employers and employees will benefit from such plans as each party will gain tax credits for their contributions.

On one hand, small businesses will receive tax credits should they choose to auto-enroll their employees with their chosen plan. 

In addition, employers will also get a startup credit of approximately 50% of the original startup cost, with a maximum amount of $500 per year for the first three years.

On the other hand, employees whose gross income is below the limit may get a non-refundable credit of up to $2,000 per year in contributions.

Last, but certainly not the least, is that employees and self-employed individuals can diversify their investment choices. Their contributions can be invested in a number of options including mutual funds and individual stocks, thereby growing their contributions and funds which they can benefit from when they retire.

Qualifications and Eligibility for a Simple IRA

Small businesses that have 100 employees or less may qualify for the Simple Retirement Plan. However, these employers must ensure that employees under the business have already received at least $5,000 in compensation from the previous year.

Businesses who opt for this plan should also ensure that they are not maintaining nor are they enrolled in another retirement scheme.

Employees from companies or self-employed individuals may be enrolled under this program provided they have earned a minimum of $5,000 in the two preceding years. Likewise, they must also be eligible to earn another $5,000 in the present year to qualify for this plan.

There is no age requirement for this plan.

Businesses Who can Benefit from the Simple Retirement Plan

There are numerous businesses from all types of industries that can benefit from a Simple Retirement Plan. However, this is best for small businesses with not more than 100 employees in its roster.

Mom and pop shops, tech startups with less than 100 employees, and even boutique and retail establishments may apply, provided they fulfill the said requirements.

The Features of a Simple Retirement Plan


The Bottom Line

A Simple Retirement Plan lets employees and employers alike have the ability to get more from its flexible terms. With its tax breaks and savings benefits, this program ensures that individuals have enough money to enjoy their golden years.