Simple IRA - Affordable Plans For Small Businesses

In today's world, employees are not only looking for competitive salaries, but they are also looking for competitive benefits as well. Retirement savings plans are at the top of employees list when it comes to benefits, and if businesses want to find and keep the best employees, they need to offer some retirement plan. Almost all large companies offer retirement plans, but many small businesses do not have plans to offer their employees. Some small business owners feel that funding a retirement plan will be too expensive and too difficult, but the Simple IRA offers an affordable retirement plan for small business owners.

While you may not be able to afford what it costs to start and manage a 401k retirement plan, this does not mean there are no options for your small business. There is a good chance that your small business is eligible to offer Simple IRA plans to your employees. In 1996 the government introduced the Simple IRA plan, targeted to small businesses that employ less than 100 employees.

If you do decide that starting a Simple IRA plan may be a great idea, you do need to understand the details of this plan. First, you must contribute to a Simple IRA for all of your employees that make more than $5000, whether they decide to contribute to this plan or not. If they do not contribute to the plan, then you must make a tax deductible contribution equal to a flat 2% of their annual salary to their Simple IRA account. On the other hand, if your qualified employees do decide to contribute as well, then you can match their contributions up to 3% of their annual salary. The 3% limit is your only duty even if your employees decide to contribute more money on their own.

With a Simple IRA, employees are immediately 100% vested, which means that they can have access to their money immediately after they join the plan. Some employers feel that this is a drawback, since employees do not have to stay a specific amount of time at the company to be able to collect on these benefits. On the other side of the coin, employees find that this is satisfactory for them, since they will not lose their retirement money should they have to move one.

Although there are a few disadvantages to having a Simple IRA plan within your company, the advantages outweigh the disadvantages. It is difficult to find another retirement plan that will allow you to start with such little money. Usually it only costs about $15 for each employee in your company to join, and they are inexpensive to keep up as well. If you find that your company has between 15-99 employees, then you may have a hard time beating the Simple IRA retirement plan.

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