A SIMPLE is an Affordable Retirement Plan For Small Businesses

A SIMPLE (Savings Incentive Match Plan for Employees) is a retirement plan that small business owners can offer to their employees.


Here are the basic features of a SIMPLE:

  1. Eligibility: Businesses with 100 or fewer employees who earned $5,000 or more in compensation in the preceding year are eligible to set up a SIMPLE plan.
  2. Contribution Limits: Employees can make pre-tax contributions of up to $13,500 per year (in 2021 and 2022), with catch-up contributions of up to $3,000 per year for employees aged 50 or older. Employers must either match employee contributions dollar for dollar up to 3% of the employee’s compensation OR make a non-elective contribution of 2% of the employee’s compensation.
  3. Immediate Vesting: Employees are immediately vested in all contributions made to their SIMPLE accounts.
  4. Easy Administration: SIMPLE plans are easy to set up and maintain. Employers can use a financial institution, such as a bank or brokerage firm, to handle the plan administration.
  5. Tax Benefits: Contributions made to a SIMPLE plan are tax-deductible for the employer AND tax-deferred for the employee. Employees don’t pay taxes on contributions until they withdraw the money.

Overall, a SIMPLE is a simple, low-cost retirement plan that small business owners can use to provide their employees with a retirement savings option.