SIMPLE IRAs

A Savings Incentive Match Plan for Employees (SIMPLE) IRA is a retirement plan that may be established by employers, including self-employed individuals of sole proprietorships, partnerships, corporations, and non-profit organizations that have 100 or fewer employees who earned at least $5,000 during the preceding year.

The SIMPLE IRA allows eligible employees to contribute part of their pre-tax compensation to the plan. This means the tax on the money is deferred until it is distributed. This contribution is called an elective-deferral or salary-reduction contribution.  The employer has two alternatives when it comes to making contributions. The first is to match the amounts that each employee makes toward his or her own elective-deferral contribution up to 3% of the employee’s annual compensation. The second alternative is for the employer to make a flat 2% non-elective contribution to all qualified employees, regardless of whether the employee makes any contributions.

Contributions to SIMPLE IRAs are immediately 100% vested, and the IRA owner directs the investments.  Our SkyOak Advisors can work with each employee and employer to selecting appropriate investment strategies.

Unlike qualified plans, a SIMPLE IRA plan is easy to administer. The start-up and maintenance costs for SIMPLE IRAs are very low compared to qualified plans and can be opened using SkyOak’s custodian, Charles Schwab.