A SIMPLE IRA plan is a savings option for employers
with 100 or fewer employees.
This plan allows employees to contribute a percentage
of their salary each paycheck and requires employer
contributions. Under SIMPLE IRA plans, employees
can set aside up to $11,500 in 2012 and $12,000 in
2013 ($14,000 in 2012 and $14,500 in 2013 if age 50 or
older), by payroll deduction (subject to cost-of-living
adjustment in later years). Employers must either
match employee contributions dollar-for-dollar – up to
3 percent of an employee’s compensation – or make a
fixed contribution of 2 percent of compensation for all
eligible employees, even if the employees choose not
If your plan provides for it, you can choose to
automatically enroll employees in SIMPLE IRA plans
as long as the employees are allowed to choose not
to have salary reduction contributions made to their
SIMPLE IRAs or to have salary reduction contributions
made in a different amount.
SIMPLE IRA plans are easy to set up. You fill out a
short form to establish a plan and ensure that SIMPLE
IRAs (to hold contributions made under the SIMPLE
IRA plan) are established for each employee. A
financial institution can do much of the paperwork.
Additionally, administrative costs are low.
You may either have your employees set up their own
SIMPLE IRAs at a financial institution of their choice
or have all SIMPLE IRAs maintained at one financial
institution you choose.
Employees can decide how and where the money will
be invested, and keep their SIMPLE IRAs even when
they change jobs.