![]() ![]() Example 2:Īustin works for the Skidmore Tire Company, a small business with 75 employees. The financial institution holding Elizabeth's SIMPLE IRA has several investment choices and she is free to choose which ones suit her best. Therefore, the total contribution to Elizabeth's SIMPLE IRA that year is $4,000 (her $2,500 contribution plus Rockland's $1,500 contribution). The Rockland matching contribution is $1,500 (3% of $50,000). Under this option, if a Rockland employee does not contribute to his or her SIMPLE IRA, then that employee does not receive any matching employer contribution.Įlizabeth has a yearly compensation of $50,000 and contributes 5% of her compensation ($2,500) to her SIMPLE IRA. Rockland has decided to establish a SIMPLE IRA plan for its employees and will match its employees' contributions dollar-for-dollar up to 3% of each employee's compensation. How does a SIMPLE IRA plan work? Example 1:Įlizabeth works for the Rockland Quarry Company, a small business with 50 employees. Employee is always 100% vested in (or, has ownership of) all SIMPLE IRA money.Under the "nonelective" contribution formula, even if an eligible employee doesn't contribute to his or her SIMPLE IRA, that employee must still receive an employer contribution to his or her SIMPLE IRA equal to 2% of his or her compensation up to the annual limit of $330,0 $305,0 $290,0 $285,0 (subject to cost-of-living adjustments in later years). ![]() 2% nonelective contribution for each eligible employee.Matching contribution up to 3% of compensation (not limited by the annual compensation limit), or.Employer is required to contribute each year either a:.Employer cannot have any other retirement plan.Easily established by adopting Form 5304-SIMPLE PDF, Form 5305-SIMPLE PDF, a SIMPLE IRA prototype or an individually designed plan document. ![]()
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