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SIMPLE IRA Company Retirement Plan

A SIMPLE IRA plan (Savings Incentive Match PLan for Employees) allows employees and employers to contribute to traditional IRAs set up for employees. It is ideally suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan. 

Atlas will provide the following: 

  • Investment Management.
  • Investment Education and Advice to Participants.
  • Consulting to provide the Asset Lineup and Model Portfolio’s.
  • Investment Platform that will integrate with your payroll company to receive contributions.
  • Investment Platform will execute trades from payroll contributions at no additional charge.
  • Individual IRA accounts can be transferred into Investment Platform to consolidate
    management.

SIMPLE IRA plans can provide a significant source of income at retirement by allowing employers and employees to set aside money in retirement accounts. SIMPLE IRA plans do not have the start-up and operating costs of a conventional retirement plan.

  • Available to any small business – generally with 100 or fewer employees
  • Easily established by adopting Form 5304-SIMPLE, 5305-SIMPLE, a SIMPLE IRA prototype or an individually designed plan document
  • Employer cannot have any other retirement plan
  • No filing requirement for the employer
  • Contributions:
    • Employer is required to contribute each year either a:
      • Matching contribution up to 3% of compensation (not limited by the annual compensation limit), or

      • 2% nonelective contribution for each eligible employee 

        • Underthe“nonelective”contributionformula,evenifaneligible employee doesn’t contribute to his or her SIMPLE IRA, that employee must still receive an employer contribution to his or her SIMPLE IRA equal to 2% of his or her compensation up to the annual limit of $280,000 for 2019(subject to cost-of-living adjustments in later years)

    •  Employees may elect to contribute

    • Employee is always 100% vested in (or, has ownership of) all SIMPLE IRA money

Pros and Cons: 

  • Easy and inexpensive to set up and operate
  • Employees share responsibility for their retirement
  • No discrimination testing required
  • Inflexible contributions
  • Lower contribution limits than some other retirement plans

Who Contributes: Employer must contribute and employee may contribute.
Contribution Limits: Total contributions to each employee’s SIMPLE IRA are limited.
Filing Requirements: An employer generally has no filing requirements.
Participant Loans: Not permitted. The assets may not be used as collateral.
In-Service Withdrawals: Yes, but includible in income and subject to a 10% additional tax if under age 59-1/2. Also, if withdrawals are made within the first two years of participation, the 10% additional tax is increased to 25%.

Schedule a Consultation

What are the contribution rules? 

SIMPLE IRAs hold the contributions made for each eligible employee. A SIMPLE IRA is funded by: 

  • For 2019, annual employee salary reduction contributions (elective deferrals)
    • limited to $13,000*
    • For employees age 50 or over, a $3,000 “catch-up” contribution is also allowed*
  • For 2015-2018, annual employee salary reduction contributions (elective deferrals)
    • limited to $12,500*
    • For employees age 50 or over, a $3,000 “catch-up” contribution is also allowed* 
  • Employer contributions. The employer must annually choose one of the contribution methods below. The employer must tell employees during the election period which method will be used for the following year:
    • 2% nonelective contribution – 2% of each eligible employee’s compensation regardless of whether or how much the employee deferred, or 
    • 3% matching contribution – match of employee’s elective deferrals on a dollar-for-dollar basis up to 3% of the employee’s compensation.
      • May reduce the 3% limit to a lower percentage but in any event, not lower than 1%. May not lower the 3% limit for more than 2 calendar years out of the 5-year period ending with the calendar year the reduction is effective.
    • The employer cannot make any other contributions to a SIMPLE IRA plan. 

*Each employee’s total contributions are limited and subject to annual cost-of-living- adjustments. If you miscalculated a participant’s contribution, find out how you can correct this mistake. 

When making employer contributions, you must follow the definition of compensation stated in the plan document. Compensation generally includes the pay a participant received from you for personal services for a year. If you used the wrong compensation to calculate a participant’s deferrals or employer contributions, find out how you can correct this mistake. 

Automatic Enrollment: A plan feature allowing an employer to automatically deduct a fixed percentage or amount from an employee’s wages and contribute that to the SIMPLE IRA plan unless the employee has affirmatively chosen to contribute nothing or to contribute a different amount. These automatic enrollment contributions qualify as elective deferrals. 

Annual Election Period: Each year employees can change their contribution levels during the plan’s election period. This election period must be at least 60 days long, and employees must receive prior notice about an upcoming election opportunity. SIMPLE IRA plans must have an annual election period extending from November 2 to December 31. A plan can have more election periods each year in addition to this 60-day election period. 

What are the basic withdrawal rules? 

SIMPLE IRA contributions and earnings can be withdrawn at any time, subject to the general limitations imposed on traditional IRAs. A withdrawal is taxable in the year received. If a participant makes a withdrawal before he or she attains age 59 1⁄2, generally a 10% additional tax applies. If this withdrawal occurs within the first 2 years of participation, the 10% tax is increased to 25%. 

A participant who withdraws funds from a SIMPLE IRA may continue to participate in the employer’s SIMPLE IRA plan. 

SIMPLE IRA contributions and earnings must eventually be distributed following the IRA required minimum distribution rules. 

Rollovers 

SIMPLE IRA contributions and earnings may be rolled over tax-free from one SIMPLE IRA to another. A tax-free rollover may also be made from a SIMPLE IRA to an IRA that is not a SIMPLE IRA, but only after 2 years of participation in the SIMPLE IRA plan. 

Participant loans 

Loans are not permitted. However, SIMPLE IRA accounts are IRAs and withdrawals may be possible. See the IRA FAQs. 

What are the filing and notice requirements?

Filing requirements: An employer generally has no filing requirements, and does not need to file an annual Form 5500 return. 

W-2 Reporting: SIMPLE IRA contributions are not included in the “Wages, tips, other compensation” box of Form W-2, Wage and Tax Statement, but check the Retirement Plan box in box 13. For more information, see the instructions for Forms W-2 and W-3. Salary reduction contributions must be included in the boxes for Social Security and Medicare wages. 

SIMPLE IRA contributions are not subject to federal income tax withholding. However, salary reduction contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes. Matching and nonelective contributions are not subject to these taxes. 

Reporting employer deductions of contributions. The employer can deduct its contributions to a SIMPLE IRA plan. 

  • Sole proprietors may deduct SIMPLE IRA contributions for employees on Schedule C (Form 1040), Profit or Loss From Business, or Schedule F (Form 1040), Profit or Loss From Farming.
  • Partnerships deduct contributions for employees on Form1065, U.S. Return of Partnership Income.
  • Sole proprietors and partners may deduct contributions for themselves on Form 1040, U.S. Individual Income Tax Return. (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065), Partner’s Share of Income, Credits, Deductions, etc., you get from the partnership).
  • Corporations deduct contributions on Form 1120, U.S. Corporation Income Tax Return, Form 1120-A, U.S. Corporation Short-Form Income Tax Return, or Form 1120S, U.S. Income Tax Return for an S Corporation.
    *Majority of the SIMPLE IRA content comes directly from the www.IRS.gov web site