Simple IRA Model Salary Deferral Agreement
An employer-sponsored retirement plan is one of the benefits employees appreciate and potential job candidates would like. A retirement plan is an effective hiring tool. The Simple IRA was purposely designed for small businesses. The initial set-up fees, administrative costs, annual recordkeeping and paperwork are minimal, appealing to small business owners.
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Simple IRA Model Salary Deferral Agreement
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The Simple IRA Model Salary Deferral Agreement is part of the documentation employees complete when a company sponsors a Simple IRA retirement plan for their employees. Employees submit a new form annually. The document includes the date the program begins and describes the terms of the agreement. The employer's Simple IRA contribution is recorded. The employee elects whether to participate or opt out of the plan. The name of the provider financial institution is entered. The employer and employee sign the document.
Annual SIMPLE IRA Requirements
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An employer must serve notice to all employees every year that they have the opportunity to change their Model Salary Agreement. This is called the "annual election notice." The employer notifies employees of the business' intentions to continue the plan the next year and communicates the business' contribution portion. SIMPLE plans follow a calendar year from January 1 to December 31.
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Employer Contributions
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The employer has two contribution alternatives. The company may elect a three percent matching contribution. This means the employer matches an employee's contribution dollar for dollar up to a value equal to three percent of the employee's salary. The business can elect to match less than three percent during difficult economic years. The employer's second alternative is a two percent contribution to every employee's Simple IRA account, whether or not the employee contributes anything. The employer's decision is put in writing and communicated to employees in the annual Salary Deferral Agreement. Another decision the employer makes is whether or not to designate one financial institution as the provider of all Simple IRA accounts or allow employees to select their own financial institution.
Employee Contributions
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The annual Salary Deferral Agreement is required to be provided to employees during a 60-day election period. The employee is given 60 days notice of the employer's contribution and has that time to complete and return the form. Employees may modify their allocation, choose not to take part in the plan or increase or decrease their contribution. The employee designates a percent of salary or a specific monetary amount. An employee can stop contributing to the plan at anytime during the year, but would not be allowed to begin participating again until the following year.
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