SIMPLE stands for Savings Incentive Match Plan for Employees. This is a retirement plan established by small business employers who have less than 100 employees. Like many other retirement plans, the SIMPLE IRA is funded with pre-tax dollars. Once an individual reaches the distribution phase of this plan, the money is taxed.
Who is eligible to have a SIMPLE IRA?
In order for an employer to set up a SIMPLE IRA, the employer may have no more than 100 employees. The employer may not be a part of any other retirement plan such as a SEP IRA, 403(b), and/or 401(k). Employees need to keep an eye on their income and certain timelines. Let’s assume an employer established their SIMPLE IRA this year. As long as an employee has earned an annual income of $5,000 or more at least twice in any of the previous years, and is expected to earn more than $5,000 this year, that employee is eligible. In most cases, you are eligible as long as you have had an income from your employer of at least $5,000 in the past couple of years and there is no foreseeable change to your income. Take special note if you have other benefits through a union agreement. You may or may not be eligible.
SIMPLE IRA contributions
The employer must make one of two types of contributions. One is a dollar-for-dollar matching contribution. This is not to exceed 3% of the employee’s compensation. These are known as elective-deferral contributions. The other option is a straightforward 2% of salary contribution that that is made regardless of how much the employee may choose to contribute. This match does not include any compensation in excess of $245,000. This is known as a non-elective contribution.
SIMPLE IRA distributions
The distributions for a SIMPLE IRA are very similar to those of a regular IRA. In most cases you will face penalties if you choose to take distributions before the age of 59 ½. After you reach 59 ½ the money is then taxed as normal income. Required Minimum Distributions after the age of 70 ½ are also required.
The real difference of a SIMPLE IRA is the Two Year Rule. In most cases you are not allowed to transfer, roll over, or take early distributions within two years of creating the IRA. If you do so, you may face a 25% fee.
Adding Gold or Silver to a SIMPLE IRA
When dealing with a SIMPLE IRA, there are more rules on transfers and rollovers than the majority of other retirement plans. American Bullion specializes in adding precious metals to retirement accounts. Allow one of our specialists to assist you in navigating your options. Call us today at 1-800-326-9598 to determine the best option that suits your needs.