A Savings Incentive Match Plan for Employees Individual Retirement Account (SIMPLE IRA) is a retirement savings plan designed for small businesses with up to 100 employees. This cost effective plan type has similar features as a 401(k) plan, without the expensive administrative cost, testing and governmental reporting requirements. It offers a mandatory employer contribution feature and has lower contribution limits when compared to a 401(k) plan. The OppenheimerFunds SIMPLE IRA program offers employers and their participants the support and resources needed for a successful retirement plan.
Designed for governmental, tax exempt and for profit entities with 100 or fewer eligible employees.
Employee coverage requirements
- Must include employees age 21 and up to two years of service.
- Have earned income of at least $5,000 per year, and they must expect to earn $5,000 during the current year.
- Worked three out of the proceeding five years.
- Employer may set less restrictive requirements
- Immediate 100% vesting in contributions.
Funding the SIMPLE IRA and contribution limits for 2016
Employer contributions are mandatory. In addition, the plan can be funded through participant salary deferrals.
Employers are required to make an annual contribution and may choose from one of two contribution formulas:
- A dollar-for-dollar matching contribution, up to 3% of each employee’s compensation to a maximum of $12,500, or $15,500 for participants who are age 50 and above. This contribution may be reduced to a level below 3%—but not below 1%—in two out of every five years.
- A nonelective contribution equal to 2% of pay for all eligible compensation up to $265,000 — resulting in a maximum contribution of $5,300 for each eligible employee.
- Employers may switch formulas in a new calendar year as long as employees are notified at least 60 days prior to January 1.
Participant salary deferrals
- The maximum allowable deferral is the lesser of :
- 100% of employee’s compensation or $12,500
- Individuals age 50 and above may contribute an additional $3,000 in catch-up contributions, for a maximum of $15,500.
- Loans and hardship distributions are not permitted.
- SIMPLE IRA plans have a 25% penalty for withdrawals taken within the first two years from first contribution.
- Withdrawals are permitted after a triggering event occurs: retirement, termination of service, death or disability.
- Generally withdrawals are penalty-free after age 59 ½. Certain exceptions may apply; see IRS Publication 590-B for additional information.
- Furnish completed IRS Form 5304 to participants annually.
- Fund plan timely.
OppenheimerFunds is a high conviction global leader in asset management with a history of providing long-term innovative investment strategies, combined with intelligent risk taking, to help meet investors’ needs.
- No plan installation fees.
- Low annual maintenance fee per participant1:
- $25 for account balances under $50,000.2
- Fund expenses apply.
Call 800.255.2750 to talk to your Regional Advisor Consultant for more information.
1 Other account-related fees (if applicable), and fund expenses apply.↩
2 The fee will be waived if the total investments in Oppenheimer funds retirement and/or nonretirement accounts, excluding OppenheimerFunds direct-sold 529 plans, is $50,000 or more.↩
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