A SIMPLE 401(k) plan is a retirement savings tool available only to businesses with 100 or fewer employees. A SIMPLE 401(k) is similar to a traditional 401(k), with differences that affect the employer more than the employee.
Savings Incentive Match Plan for Employees (SIMPLE) plan makes it possible for companies with as few as two employees to establish a 401(k). SIMPLE 401(k) plans are designed for businesses with 100 employees or fewer who earn $5,000 or more per year.
A subset of the 401(k) plan is a SIMPLE 401(k) plan which is offered so that small business owners can have a cost-effective way to offer retirement benefits to their employees. The SIMPLE 401(k) is not subject to annual nondiscrimination testing and does allow for loans. Contributions to a SIMPLE 401(k) are immediately 100% vested, which means that an employee who meets the requirements to receive distributions from the plan may withdraw his/her entire account balance at any time. Also, the contribution limits are lower for a SIMPLE 401(k) plan than for a traditional 401(k) plan.
Eligible employers must have no more than 100 employees who have received at least $5,000 in compensation from the employer for the previous year. Employers cannot maintain any other retirement plan for employees who are eligible to participate in the SIMPLE 401(k); however, they may choose to maintain a second retirement plan to cover collectively bargained employees if they are excluded from the SIMPLE 401(k) plan.
Under a SIMPLE 401(k) plan, an employee can elect to defer some compensation. But unlike a regular 401(k) plan, you the employer must make either:
To learn more about your SIMPLE 401(k) options, complete the form below and a TRA representative will be promptly be in contact with you.