A SIMPLE IRA is also known as a Savings Incentive Match Plan for Employees IRA.  A business must have  100 or fewer employees to participate.  A SIMPLE IRA creates a relationship between the small business employer and the financial institution that manages the funds. 

 

 

The employer setting up the plan can choose to make matching contributions or nonelective contributions. If the employer decides to make matching contributions, only eligible employees who have elected to make contributions will receive an employer contribution. If the employer decides to make a nonelective contribution, each eligible employee must receive a contribution regardless of whether the employee makes contributions. 
 

For employees, the annual contribution limit is $11,500 in 2010. Employees age 50 and older may make additional catch-up contributions of $2,500 in 2010.

 

The employer may be eligible for a tax credit to help offset start-up costs. The tax credit can reach up to $500 per year for each of the first three years of the plan.
 

Click on the News quick link above to go to the Newsletter portion portion of our website and view the article "How do I...Set up a retirement plan for employees of my small business?"  in its entirety.  Then give us a call before you call your broker to see how a retirement plan could fit into your overall tax planning strategy.