To create a SIMPLE IRA, the employer must sign an adoption agreement that defines the provisions of the plan. All eligible participants must then enter into and sign adjournment agreements, indicating the percentage of salary they wish to contribute. Simple IRASs are then set up to receive contributions. The autonomous IRA offers the flexibility to invest in almost all investment alternatives, including individual equities, bonds and independent fund managers. An Employee Savings Incentive Plan (SIMPLE) IRA is an IRA-based plan that provides small employers with a simple way to contribute to their employees` retirement, either by adjusting employee contributions or by making non-selectable contributions for all employees. Start-up and maintenance costs are very low compared to qualified plans. Businesses, including the self-employed, partnerships and businesses, as well as some tax-exempt organizations, can develop IRA plans for their employees. Members who make payments under a SIMPLE plan before the age of 59 are generally subject to the same 10% early payment penalty that applies to other IRA account holders. However, participants who withdraw contributions from the SIMPLE plan during the two-year period from the original date of participation will receive a penalty tax of 25% instead of the 10% tax.

Staff participating in a SIMPLE plan are considered active participants to determine the deductibility of a regular IRA contribution. An employee must choose to defer a certain percentage of compensation to a dollar. For more information on the SIMPLE IRA, please contact your financial advisor or use the Convenient Locator Office to find our office (s) near you today. The SIMPLE IRA allows an employer to help employees accumulate assets for retirement. The plan is jointly financed by contributions to defer employees` wages and employer contributions. Both employer contributions from the single IRA are tax deductible and, since contributions are made to the IRA, income within the account is deferred until payment. Employers should consider the following rules before implementing a SIMPLE IRA plan: the employer is required to make a full contribution according to one of the following formulas: Each worker can indicate the percentage of salary he or she wants the employer to comply with the plan and contribute to the employer being able to do so, up to the maximum indicated by the employer. The maximum amount employees can defer in 2016 is limited to $12,500.

Participants aged 50 and over can make additional catch-up contributions of up to $3,000. This format offers only the investment options offered by investment funds and insurance companies as part of a SIMPLE IRA „package.“ While flexibility may be limited compared to the self-controlled alternative to the IRA, the investment process is much lighter, reducing the costs of holding and serving for the participant. For participants who invest small amounts on a periodic basis or wage deduction, a creditor`s product is generally much less expensive and a more efficient way to invest. Not all employees need to be covered by a simple IRA plan. The employer may exclude all workers who have not earned at least USD 5,000 in the previous two years and/or who are not expected to earn at least USD 5,000 for the current year. There are two basic investment formats for the simple IRA: self-controlled IRA and a product from a supplier. It is important that employers and workers understand the pros and cons of any alternative before implementing or modifying their SIMPLE IRA plans.