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SIMPLE

Retirement Plans Simplified

Retirement Plans Simplified

An employer sponsored retirement plan may be easy!  Savings Incentive Match Plans for Employees (SIMPLE) plans are a convenient way for business owners to provide a retirement plan for employees and themselves.  

Available to any small business, generally with 100 or fewer employees, SIMPLE plans allow tax-deferral of contributions, along with an employer flat or matching contribution.

No filing requirements or complicated testing or administration.

SIMPLE!  We believe so. 


SIMPLE Retirement Plans...

  • Allow you to contribute to your retirement on a pre-tax basis
  • Help attract and retain quality employees
  • Allow employees to enjoy the convenience of payroll deduction
  • Are easy and inexpensive to establish and operate
  • Provide reduction in current federal and state income tax
  • Provide tax deferral of earnings until withdrawn
  • Have employer contributions that are tax-deductible
  • Do not reduce your contributions to Social Security or Medicare
  • Have simplified administration limited to payroll deduction
  • Have no annual testing, filing or reporting
  • Have 100%, immediate vesting of all contributions 


Similar to 401(k) Plans, But SIMPLE

SIMPLE and 401(k) plans are similar in they both provide opportunity to reduce current income tax and provide tax-deferral of investment earnings until withdrawn, offer the convenience of payroll deduction, and employer contributions.   SIMPLE plans have lower contribution limits than their 401(k) counterparts, but have no annual reporting or filing requirements and just two options for employer contributions.   While not as complex as 401(k) plans to design or operate, SIMPLE plans still have the majority of the 401(k) benefits.  

Current Income Tax Reduction and Tax-Deferral

As a pre-tax retirement plan, your SIMPLE contributions result in lower currently taxable income.   Contributions to a SIMPLE plan do NOT reduce your contributions to Social Security or Medicare.

Hypothetical paychecks are shown below, considering a "regular" paycheck before the SIMPLE plan and after.

Note that the Federal Income Tax Withholding and State Income Tax Withholding amounts decrease, while there is no change to FICA or Medicare calculations.

Contributions to the plan, along with investment earnings, are tax-deferred until withdrawn.

Paycheck Example





Gross Wages:

SIMPLE IRA Contribution:

Employer Contribution:

Federal Income Tax Withholding:

State Income Tax Withholding:

FICA:

Medicare:

Total Taxation:

Net Pay:

Change In Take Home Pay:

Employee + Employer:

Before SIMPLE IRA

A hypothetical paycheck is shown below.  Wages are subject to federal and state incomes, social security, and Medicare withholding.


$1,000.00

$0.00

$0.00

$107.55

$31.24

$62.00

$14.50

$215.29

$784.71

2% Flat Contribution

Employer provides a flat contribution of 2% of the employee's compensation, regardless of participation by the employee.  


$1,000.00

$100.00

$20.00

$91.65

$26.44

$62.00

$14.50

$194.59

$705.41

($79.30)

$120.00

3% Matching 

Employer match up to 3% of the employee's compensation.  If the employee doesn't contribute, no employer contribution.


$1,000.00

$100.00

$30.00

$91.65

$26.44

$62.00

$14.50

$194.59

$705.41

($79.30)

$130.00

Paycheck scenarios are hypothetical, provided for concept, and should not be used for determining payroll tax withholding.

How Much May I Contribute?

The IRS establishes annual limits on employee contributions, which are indexed for inflation.  Click the button below to see the current year limitations.

Retirement Plan Contribution Limits

Choice For Employer Contributions:


2% Flat Contribution

Employer provides a 2% non-elective contribution to each employee, regardless of employee contribution, up to an annual maximum. 

3% Matching Contribution

Employee provides a matching contribution of 3% of the employee's compensation.  If the employee doesn't contribute, the employer doesn't match.

Withdrawal Rules

SIMPLE contributions and earnings may be withdrawn at any time, subject to the general limitations on traditional IRAs.  Withdrawals are taxable in the year received.  Withdrawals prior to age 59 1/2 generally have an IRS imposed  10% penalty tax, unless an exception applies.  Withdrawals during the first 2 years of participation in the plan are subject to an IRS imposed 25% penalty tax.

After age 73, SIMPLE plans are subject to Required Minimum Distributions.

How Are Contributions Invested?

Contributions may be invested in stocks, mutual funds, and similar types of investments, held by custodians.  Each employee may elect their own investment risk level.  Knox Financial Services offers advisory services for SIMPLE IRA plans, where we collaborate with each employee on their time horizon, risk tolerance and attitude about risk.


Invest Efficiently
We Help You Evaluate What Type Of Plan May Work Best For Your Business

We Help You Evaluate What Type Of Plan May Work Best For Your Business

We collaborate with business owners to evaluate the various types of retirement programs available and help determine which may be a fit for your situation.  Our advisors have experience with simple to complex business structures and the available tax-qualified retirement programs available.

We also share the perspective of business owners, being owners ourselves.

Let's talk about what makes the most sense for your business.

Let's Talk

Important Information

Tax information is provided for informational use only and should not be used for preparation of your tax return.  Income tax is complex.  A qualified tax professional may assist you with determining your overall income tax liability.  Consult your attorney, accountant, or tax advisor for your specific situation.   Tax, legal, or social security claiming services are not offered through or supervised by Lincoln Investment or Capital Analysts.

For more information about SIMPLE retirement plans, visit the IRS site or contact Knox Financial Services.