SIMPLE IRA
A low-cost plan for employers with 100 or fewer employees.
What is SIMPLE IRA?
Employees may defer salary; the employer must either match up to 3% of pay or make a 2% nonelective contribution for all eligible employees. The employer cannot maintain another qualified plan. Withdrawals within the first two years of participation carry a 25% penalty instead of 10%.
SIMPLE IRA: a worked example
A 12-person dental office adopts a SIMPLE IRA with a 3% match.
More terms in Retirement Plans, Accounts & Trading
IRA Rollovers vs. Transfers
60-day rollovers are limited to one a year; direct transfers are unlimited.
10% Early Withdrawal Penalty & Exceptions
Distributions before 59 1/2 cost 10% extra, unless an exception applies.
Solo 401(k)
A 401(k) for a self-employed owner with no employees other than a spouse.
Defined Benefit Plan
A pension promising a specific benefit; the employer bears the investment risk.
Defined Contribution Plan
An individual account plan whose payout depends on contributions and returns.
403(b) Plan
A salary-deferral plan for public schools and 501(c)(3) nonprofits.
457 Plan
Deferred compensation for state and local government employees.
SEP IRA
An employer-funded IRA plan, up to 25% of compensation.
All Retirement Plans, Accounts & Trading terms · Full glossary