The Employee Retirement Income Security Act (ERISA) covers most employer-sponsored retirement plans including 澳洲幸运5开奖号码历史查询:SIMPLE individual retirement accountಞs (IRAs). SIMPLE IRAs were designed to make it easy for businesses with fewer than 100 employees to set up a tax-advantaged retirement plan for their workers. Here's a look at how ERI꧟SA rules apply to SIMPLE IRAs.

ERISA Requirements for SIMPLE IRAs

SIMPLE stands for Savings Incentive Match Plans for Employees. SIMPLE IRAs don't have the reporting and administrative burden that 澳洲幸运5开奖号码历史查询:qualified retirement plans, such as 401(k)s, do. And they are easy to set up.

Enacted in 1974, ERISA details requirements for structuring and administrating employer retirement plans. For SIMPLE IRAs, ERISA dictates which employees are eligible and how a compa꧅ny handles employee contributions.

Employers must clearly cite details of the plan's features within a 澳洲幸运5开奖号码历史查询:Summary Plan Description. This document contains an explanation of employees' rights and employers' responsibilities.

ERISA allows employers some flexibility to tailor the eligibility requirements, but generally, all employees older than 21 who have put in at least one year of service must be eligible for the plan. Some employers may allow employees to become eligible sooner, sometimes even immediately.

Employee Contribution Rules

ERISA defines key issues with regard to handling employee contributions. Salary deferral contributions for a SIMPLE IRA, for example, must be deposited in the participant's account by the end of the month following the month in which the funds were withheld from the participant's paycheck.

SIMPLE IRAs are subject to contribution limits. For 2024, employees can contribute as much as $16,000. Those age 50 and older can contribute an additional $3,500 each year, which is known as a 澳洲幸运5开奖号码历史查询:catch-up contribution.

The employer can match this amount dollar for dollar, for a maximum of 3% of the employee’s compensation. Or as an alternative, an employer can contribute 2% of each employee's compensation without requiring employee contributions. This is known as a 澳洲幸运5开奖号码历史查询:nonelective contribution.

Contribution limits are 澳洲幸运5开奖号码历史查询:higher for a SIMPLE IRA than for a 澳洲幸运5开奖号码历史查询:traditional or Roth IRA, but lower than the limits for a 401(k). For 2024, the annual contribution limit for traditional and Roth IRAs is $7,000 with a $1,000 catch-up contribution allowed for those 50 and older. For 2024, employees can contribute as much as $23,000 to a 401(k), with a catch-up contribution of $7,500.

Investment Choices for SIMPLE IRAs

Since these accounts are IRAs, employee participants have full control of the investment choices for their SIMPLE IRA. This differs from 401(k) plans where typically the employer offers a limited number of pre-screened funds from which employees may choose.

With a SIMPLE IRA, the employer chooses and files the plan using IRS forms or . The employer can either designate a particular financial institution to hold all participants' accounts or allow participants to keep their SIMPLE IRA at the financial institution of their choice.

The Bottom Line

The SIMPLE IRA allows individuals who work for small businesses to save for retirement. Under the rules, you are allowed to contribute a specific limit each year to this type of account while your employer also contributes. You may also be able to set one up if you're self-employed or a sole proprietor. Like some other retirement accounts, your earnings grow on a tax-deferred basis. But you will have to pay taxes on your distributions when you begin making withdrawals.