SIMPLE IRA

For businesses with 100 or fewer employees and self-employed individuals.

Eligibility

SIMPLE IRAs are available to any business with 100 or fewer employees who earned $5,000 or more in compensation during any two preceding years and are expected to earn at least that amount in the current year. Eligible employees must be allowed to participate, and the employer cannot sponsor another retirement plan concurrently. The plan must be offered to all eligible employees without discrimination.

Contribution Limits

Employees can make elective salary deferrals up to the annual limit set by the IRS. Employers are required to contribute in one of two ways:

A dollar-for-dollar match of employee contributions up to 3% of compensation, or

A 2% non-elective contribution for all eligible employees, regardless of whether they contribute.

Employee contributions are made pre-tax. Employers must apply the same contribution method to all eligible employees for the entire year. Contribution limits are lower than those of a 401(k) but higher than traditional IRAs.

Tax Benefits

Employee contributions to a SIMPLE IRA reduce taxable income in the year they are made. Earnings within the account grow tax-deferred until withdrawal. Employer contributions are also tax-deductible as a business expense. This structure provides meaningful tax advantages for both employers and employees.

Who contributes

Both the employee and the employer contribute to a SIMPLE IRA. Employees elect to defer a portion of their wages on a pre-tax basis. Employers are required to either match contributions up to 3% of compensation or make a 2% non-elective contribution to all eligible employees, regardless of participation. Employer contributions are immediately vested and must be made annually.

Withdrawals & Distributions

Funds can be withdrawn from a SIMPLE IRA at any time, but distributions before age 59½ are generally subject to a 10% early withdrawal penalty. If the withdrawal occurs within the first two years of participation, the penalty increases to 25%. As with traditional IRAs, Required Minimum Distributions (RMDs) begin at age 72 unless updated by IRS guidance.

Roth contributions are not available in SIMPLE IRAs, although pending legislation may allow Roth options in the future depending on custodian availability.

Fees & Expenses

Global Advisers offers investment management for SIMPLE IRA accounts through leading custodians. There is no cost to open or close an account. We charge a transparent annual advisory fee based on assets under management. Additional fund expenses or transaction costs may apply, depending on the investments selected.

Administrative responsibilities

SIMPLE IRAs are among the least burdensome retirement plans from a compliance perspective. Employers are not required to file IRS Form 5500 or perform nondiscrimination testing. However, they must provide employees with an annual summary plan description and election form. Contribution deposits must be made in a timely manner, typically within 30 days of the end of the payroll period.

Deadlines

To establish a SIMPLE IRA for the current tax year, the plan must be set up by October 1. New businesses formed after October 1 may have additional flexibility in their first year. Contributions must be made by the employer’s tax filing deadline, including extensions.