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Simple IRA Regulations

Savings Incentive Match Plans for Employees (SIMPLE) Individual Retirement Accounts (IRAs) are tax-advantaged, tax-deferred plans established by the Internal Revenue Service (IRS) tax code. IRS rules spell out how employers can establish and operate SIMPLE IRAs.

  1. Benefits

    • SIMPLE IRAs allow employees to defer a portion of their income to the plan, and employers to contribute a percentage of employee income. Both types of contributions are tax deductible, and the plan is tax deferred until employees withdraw money from the account.

    Function

    • Employers establish SIMPLE IRAs by opening an account with a certified trustee. SIMPLE IRA trustees help employers draw up an official plan document, which spells out who may participate in the plan and each participant's rights and responsibilities.

    Time Frame

    • Employees who wish to establish SIMPLE IRAs for the following year may do so by Oct. 1. Then, they must designate an election period that runs at least from Nov. 2 to Dec. 31. During the election period, employees can commit to depositing a portion of next year's paychecks into their SIMPLE IRAs.

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