Features

• SIMPLE IRAs are tax-advantaged retirement accounts that employers can set up if they have 100 or fewer employees and do not already offer a different retirement plan. The IRS gives employers a two-year grace period to continue operating the plan once the company surpasses 100 employees.
  
  

Function

• Each year, participating employees sign up to have a portion of their income deposited in their SIMPLE IRAs. Employers contribute up to three percent of employee income. Both employer and employee contributions are tax deductible, and plan assets are tax-deferred until employees begin making withdrawals.
  
  

Benefits

• The IRS eliminates many of its more stringent retirement plan reporting requirements for employers who offer SIMPLE IRAs, in order to make it easier for them to extend retirement benefits to their employees. To make the deal even sweeter, small businesses may qualify for a tax credit the first three years they offer the plan.
  
  

Considerations

• SIMPLE IRAs are a good option for small businesses owners who know they can afford to contribute between one and three percent of employee income annually, but do not have the budget to administer a more complicated plan, like a 401(k) or pension plan.