What's a SIMPLE plan?

What's a SIMPLE plan?

Gregg Wind (Partner, Wind Bermer Hockenberg, LLP) gives expert video advice on: What retirement savings options do I have as a small business owner?; What's a "SEP IRA"?; What's a SIMPLE plan? and more...

A SIMPLE plan is just as it infers, very simple to keep track of. It's really an IRA, where an employee puts money into an IRA for an employee. The maximum deduction for 27 is $1,5. And the employer generally matches any amount that an employee would have withheld from their salaries. So if an employee has $25 withheld before taxes during the year, the employer would generally match that. As a small business owner, you can, in fact, set up a SIMPLE plan for yourself and separate accounts for each of your employees. So if you have five employees, you would have six different SIMPLE accounts and money would be placed into each account. While the advantages of a SIMPLE plan are that the administrative costs are very, very low, and it's, for most people, conceptually easy to understand, also the limits are a little bit lower than with other types of plans, at $1,5 for example, as compared to a $45, limit for a profit-sharing plan, or a SEP IRA.