The SIMPLE plan is a simplified type of retirement plan that was developed specifically for small businesses. It came into effect for all tax years after 1996, and it added an incentive to assist employees of smaller businesses save for retirement, while being given significant tax breaks. The term "SIMPLE" comes from its full name, which is Savings Incentive Match Plan for Employees.
It is very simple to administer this plan, because it doesn't have difficult qualifications that are typically associated with other retirement plans. All of the associated legal costs and administrative costs are minimal, which is critical for small businesses.
The SIMPLE plan is also excellent for small businesses, because the employer will not have any fiduciary liability that would result from the employee or their beneficiary taking control over the assets in their own SIMPLE account. This makes reporting very easy, and eases the burden that offering a retirement plan might put on the typical small business.
If your business employs 100 people or fewer who earned at least $5,000 for the previous year, and you do not have any other type of employer-sponsored retirement plan, you should be eligible for the SIMPLE plan. If you are currently eligible and you later grow so much you become ineligible, you will have a grace period of two years during which you can still maintain the plan.
Self-employed people are also eligible to open a SIMPLE plan. You do not have to have any employes to qualify, so you might look into whether the SIMPLE retirement plan is a good option for you if you are self-employed.
The bottom line is that small businesses would do well to consider setting up a SIMPLE retirement plan for its employees. There are substantially less reporting requirements and other red tape than with other types of retirement plans, making it quite easy to set up and administer. This is a very good way to make sure your employees are well taken care of, and that the futures of their families will be protected. This is one of the most important things that you, as an employer, can do to be responsible toward your employees.
If you are employed in a small company, and you do not have any type of retirement plan, you might consider asking your employer to consider starting this type of plan. Of all of the types of benefits that may be available to employees, a good retirement package is one of the most critical. You can gather material about the SIMPLE plan, then present your findings to your employer. You may be able to talk your employer into setting up this type of retirement plan, even if you have been unsuccessful in lobbying for one in the past, simply because of the ease of administering this program makes it viable for almost any small business.
If you need more information about the SIMPLE retirement plan, you can contact an investment professional. Most of them should be well-versed in the ins-and-outs of this plan, and they should be able to help you set one up.
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SimpleRetirementPlan Tip #1
Retirement can be expensive. It is estimated that you’ll need about 70 percent of the income you are drawing before retirement to maintain your standard of living. Start your Retirement Savings Plan |
SimpleRetirementPlan Tip #2
Find out If your employer offers a plan. If they do, check to see what your benefit is worth. Before you change jobs, find out what will happen to your pension. Learn what benefits you may have from previous employment. |
SimpleRetirementPlan Tip #3
If your employer doesn’t offer a retirement plan, suggest that it start one. Simplified plans can be set up by certain employers. |