A SIMPLE IRA is retirement savings plan. You and your employees can put a percentage of pay aside for retirement. The money will grow tax-deferred until it’s withdrawn at retirement.
SIMPLE IRA is employer-sponsored plan offered within small businesses. This plan allows employees and employers to contribute to traditional IRAs set up for employees.
SIMPLE IRAs are designed for small businesses. This plan is for anyone who is self-employed, owns a small business, or any business with 100 or fewer employees.
The annual contribution limit for a SIMPLE IRA Plant is $14,000 for 2022 and $15,500 in 2023. For employees age 50 or older, a $3,500 “catch-up” contributions is also allowed.
You have to pay income tax on any amount you withdraw from your SIMPLE IRA. You may also have to pay an additional tax of 10% or 25% on the amount you withdraw unless you are at least age 59½.
Employees are always 100% vested in the funds in their SIMPLE IRA accounts. If they leave their job, they can take all of the funds with them, including any contributions from the employer.
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.