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Savings Incentive Match Plan for Employees (SIMPLE) IRA
$150 ESTABLISHMENT FEE
A Savings Incentive Match Plan for Employees, commonly referred to as a SIMPLE IRA, is a type of employer-sponsored retirement savings plan. It is a great way to increase the amount that you and your employees are saving for retirement. The SIMPLE IRA is an alternative option for self-employed individuals or small business owners who have 100 employees or fewer.
The rules governing a SIMPLE IRA plan are not as complicated as a 401(k) plan. Contributions made to the plan have the potential to provide the employer with a tax-deduction equivalent to the amount of the contribution made into the account each year. This potential tax benefit is subject to government guidelines. Earnings within the account are tax-deferred until withdrawn, just like a 401(k) plan.
This means that the investment income in these accounts grows without having to be included in the account owner’s annual taxable income. Only when the funds are withdrawn from the account as a distribution will there be a potential tax liability.
One of the most notable benefits of a SIMPLE IRA is that funds are tax-deferred while in the account. That means that any money in the account is also tax-deferred until withdrawn from the account. For clarification, tax-deferred means you do not have to pay taxes until the funds or assets are removed from the account.
You can invest in almost anything except for the prohibited investments outlined by the Internal Revenue Code. A few examples of investments you can partake in are: private companies, third-party lending/promissory notes, or oil and gas ventures. However, it is important to be aware of any potentially prohibited transactions when selecting and making investments within the plan to ensure you do not invest in a prohibited investment.
Contributions to a SIMPLE IRA may be tax deductible by your business, provided you meet certain requirements.
LONGER CONTRIBUTION PERIOD
Unlike a Traditional IRA, which prohibits contributions in the tax year the customer attains age of 70 ½, your employees may receive contributions regardless of their age as long as they meet the requirements of the SIMPLE IRA Employer Plan document.
This plan assists in motivating employee retention by providing your team with additional benefits such as the ability to save more for retirement, by being employed with your company.
Contributions made to a SIMPLE IRA are always 100% vested.
NOTE: Please visit www.irs.gov for a complete breakdown of the rules and regulations concerning SIMPLE IRAs. Certain restrictions apply regarding prohibited transactions.
|For Tax Year 2019|
|Employer Contribution Limits*||Up to 3% of Compensation
|Up to 3% of Compensation
|Employee Contribution Limit||$12,500||$13,000|
|Employee Catch-Up Contribution
(Age 50 or Older)
*Employers can choose from one of three contribution options:
- Match employee deferrals dollar-for-dollar, up to three percent of the employee’s compensation (compensation includes employee deferrals).
- Two percent nonelective contribution to all eligible employees (even to those employees who decided not to defer) who have a minimum of $5,000 compensation from the employer for the year.**
- Elect to match a lower percentage (but not lower than one percent). This option is allowed for only two years of any five-year period.***
**The two percent nonelective contribution is based on two percent of the eligible employee’s compensation, up to the compensation cap. For 2018, the compensation cap is $275,000 and for 2019, the compensation cap is $280,000.
***The five-year period includes the current year and the prior four years. If during the five-year period there are years where the SIMPLE IRA plan was not yet established or the employer made nonelective contributions to the plan, the employer is considered as having satisfied the three percent matching contribution requirement for those specific years.
We do not offer investment, tax, financial, or legal advice to clients. Individuals who believe they need advice should consult with qualified professional(s) licensed in that area. This section of our website is devoted to providing clients and potential clients with educational information. It is in no way intended as tax advice.
Frequently Asked Questions
Here are a few of the most frequently asked questions when opening a self-directed account.
How do your fees differ from other custodians who handle traditional & alternative assets?
Provident Trust Group offers a flat-rate annual fee. This differs from many other alternative asset custodians who may increase your annual fee based on an increase in the number of assets you select, value of your assets, or even the purchase of a different asset class.
Most custodians of traditional assets collect fees and/or commissions based off of the amount of trades or recommendations of investment choices. For our full fee schedule, click here.
Can Provident Trust Group provide tax or legal advice regarding your investment?
No. If you should need tax or legal advice regarding your investment, you may engage a specialized tax law firm to provide the needed advice.
What types of investments are prohibited with retirement accounts?
The IRS does not state which investments are permissible in a qualified account or retirement plan, but they do state specific asset classes that are prohibited. The IRS currently prohibits IRAs from investing in Life Insurance, Collectibles and S-Corps. Some examples of collectibles, include:
- Metals – with exceptions for certain kinds of bullion,
- Coins – (but there are exceptions for certain coins),
- Alcoholic beverages, and
- Certain other tangible personal property.
For more information, click here for the IRS Website.
Can my account invest with other partners, including myself?
Yes, your IRA can invest with other partners and yourself individually. However, it is important to consult legal counsel in these situations to observe formalities and rules that may be associated with that investment.
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The Provident Advantage
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Transfer or Rollover old or non-performing retirement assets.
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Our simple online process makes setup a breeze so you can focus on what matters most – your retirement.
Our 100% web-based process provides easier form completion and clearer view of holdings and transactions that will assist customers in opening new accounts securely and quickly without any physical paperwork. Customers can also complete fund transfers from other custodians, electronically initiate investments, as well as manage multiple accounts with a click of a button.