A SIMPLE IRA is a tax advantaged retirement plan that is only available to businesses with 100 or fewer employees that currently doesn’t have another retirement plan. A SIMPLE IRA is an easy way for an employer and employees to save for retirement without some of the costs and hassles associated with other retirement plans. There are six advantages to a SIMPLE IRA:
- They are easy to establish and maintain. Your chosen financial institution handles most of the details.
- Employee contributions through payroll deductions are tax-deferred.
- Employers have two matching options. You can choose a 2% fixed contribution or a dollar for dollar matching contribution of up to 3% of your employees pay.
- Businesses may be eligible for a tax credit of up to $500 for each of the first three years of the plan. This can help offset the cost of setting up the plan.
- Low administrative costs.
- You don’t have to file yearly financial reports.
If you think that a SIMPLE IRA might be a good option for your business the professionals at Cruise & Associates can help you set one up. It’s not a terribly complicated process and essentially comes down to three steps.
First, you need to choose a financial institution to maintain your employees SIMPLE IRA. This step shouldn’t be taken lightly as the financial institution becomes the trustee for the plan.
Second, choose the plan that is the best fit for your situation. We can help you figure out which plan makes the most sense for your business.
Third, sign all of the relevant paperwork. There will be an IRS form and other plan documents; these are the plan’s legal document. You don’t need to send it to the IRS but you will need to keep it on file, it establishes the plan terms.
Like any financial arrangement SIMPLE IRAs are not to be entered into lightly. They are easy but you should sit down with a financial professional to establish if it’s the right option for your business. If you want to learn more about SIMPLE IRAs or any other retirement plans give us a call and we’ll set up a consultation to help you find the right option for you and your employees.
*This information should not be considered as tax/legal advice. You should consult your tax/legal advisor regarding your own tax/legal situation.