Employee Retirements

SmartCPA provide for small business and their employees. Each retirement plan will be recommended based on the business needs. The most common and easy to set up is Savings Incentive Match Plan (SIMPLE) IRA.

What Is a Savings Incentive Match Plan for Employees (SIMPLE) IRA?

SIMPLE IRA is a retirement plan that may be created or established by most employers, including self-employed individuals, partnership, LLC and Small Corporations. Generally the SIMPLE IRA allows eligible employees to contribute part of their pretax compensation to the plan. This tax due in the contribution is deferred until it is distributed of teh funds. This contribution is called an elective-deferral or salary-reduction.

Employers are required to make either matching contribution, which are based only on elective-deferral contributions made by employees, or nonelective contribution, which are paid to each eligible employee regardless of whether the employee made salary-reduction contributions to the plan. For a matching contribution, the employer’s contribution may match the employee’s elective-deferral contribution dollar for dollar, up to a maximum of 3% of the employee’s compensation.

Like most other employer plans, SIMPLE IRA allows employers a tax deduction for contributions they make to the SIMPLE IRA plan.

Contributions to the SIMPLE IRA are not taxed, but distributions from the SIMPLE IRA are.

Why Establish a SIMPLE?

Unlike qualified plans, a SIMPLE IRA plan is easy to administer. The start-up and maintenance costs for SIMPLE IRAs are very low compared to qualified plan. Because the responsibility of funding the SIMPLE IRA is shared between the employer and employee, employees have some degree of control over how much and when (the years in which) their SIMPLE IRAs may be funded.

 

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