Ira Information

Simple IRA Is Type Of Employer Provided Retirement Plan.

A simple IRA is a specific type of employer provided retirement plan. This plan is followed in the US. It can also be known as a special type of individual retirement account. This account is set up to work as an employer provided plan. It can also be considered as a qualified plan such as many of the famous plans including profit sharing plans and tax sheltered annuity plans. However, this plan comes will less complicated and less costly administration rules.

Similar to a 401(k) plan, the simple IRA is funded by a pretax salary reduction. The contribution limits set for simple plans are usually lesser than those set for most common types of employer provided retirement plans.

If you are considering the non-profit 501(c)(3) employer, then there is no benefit in establishing a simple plan. This is because the 403(b) does not need any costly administration.

Unlike many qualified tax plans, a simple IRA plan is very easy to follow. You would be happy to hear that the initiating and maintenance costs for this plan are very low when compared with other qualified plans. The funding responsibility is usually shared between the employer and employee. Hence, the employees possess certain amount of control over the actual amount and the specific period for which their simple IRAs may be funded.

Here are certain eligibility requirements set for simple IRAs.

a) The employer should have employed at least hundred or fewer employees with an earning of at least $5,000 during the preceding year. All employees employed at a specific period of time would be counted irrespective of the eligibility of participation in the simple IRA plan. b) The employer should not maintain any other plans excluding plans made for employees whose benefits are determined under a collective bargaining agreement.

The other plans in this case include SEP IRAs, SIMPLE IRAs, 403(b) plans, qualified annuity plans, employee-funded pensions trusts, state plan for employees and qualified plans including profit sharing plans, defined benefit plans, money purchase pension, target benefit plans and 401(k) plans.

The important thing to remember is that an employer must not exceed the limit of hundred employee limit each year in which the simple IRA is maintained. Any employer who fails to continue meeting this limit may maintain the SIMPLE IRA for two years once the first year limit for 100 employees is exceeded. In case, the employer still exceeds the 100-employee limit, the employer will no longer be eligible to maintain a simple IRA plan.

Simple IRA is a company sponsored plan that can be set up by any small business that consist of around 100 or fewer employees making at least five thousand dollars.

Under this plan, an employee can easily contribute to a portion of his pay to simple IRA account.

You can easily match up to three percent of the salary for the employees who contribute to their SIMPLE IRA Account. All you require to do is to match for employees who contribute to the plan.