SIMPLE Plan Flashcards
(25 cards)
What does SIMPLE stand for?
Savings Incentive Match Plans for Employees.
What are the two types of SIMPLE plans?
SIMPLE IRA and SIMPLE 401(k).
Who are SIMPLE plans designed for?
Small employers with 100 or fewer employees earning at least $5,000 in the preceding year.
What is the employer eligibility requirement for a SIMPLE plan?
100 or fewer employees, each earning at least $5,000 in the preceding calendar year.
Can an employer maintain another qualified plan and a SIMPLE plan in the same year?
No.
What is the employee eligibility requirement for a SIMPLE plan?
Earned at least $5,000 in the preceding year and expected to earn $5,000 in the current year.
What forms are used to establish a SIMPLE IRA?
IRS Form 5304-SIMPLE or 5305-SIMPLE.
When must a SIMPLE plan be established for the year?
Between January 1 and October 1 of the year the plan is to take effect.
What is the required election period for employees to make salary deferrals?
60 days.
What is the employee elective deferral limit for SIMPLE plans in 2025?
$16,500.
What is the standard catch-up contribution limit for employees age 50+ in 2025?
$3,500.
What are the two employer contribution options for SIMPLE plans?
Matching: Dollar-for-dollar up to 3% of employee compensation (can be reduced in some years).
Nonelective: 2% of covered compensation for each eligible employee, regardless of employee deferral.
What is the super catch-up contribution for ages 60–63 in 2025?
$5,250.
What additional employer contribution is allowed under SECURE 2.0?
Additional nonelective contributions up to 10% of compensation or $5,000, whichever is less, in a uniform manner.
When must employer contributions be made to a SIMPLE plan?
By the employer’s tax return deadline, including extensions.
What is the vesting schedule for SIMPLE plans?
Immediate 100% vesting for both employee and employer contributions.
Are employee deferrals subject to payroll taxes?
Yes.
How are SIMPLE plan distributions taxed?
As ordinary income.
What is the early withdrawal penalty for SIMPLE plans?
10% penalty before age 59½, but 25% penalty if withdrawn within the first two years of participation.
Do standard IRA penalty exceptions apply to SIMPLE plans?
Yes.
Can you roll over a SIMPLE IRA to another IRA or qualified plan?
Yes, rollovers are allowed.
Which SIMPLE plan allows participant loans?
SIMPLE 401(k) allows loans; SIMPLE IRA does not.
Is nondiscrimination testing required for SIMPLE plans?
No, neither SIMPLE IRA nor SIMPLE 401(k) require nondiscrimination testing.
Are employer contributions to SIMPLE plans tax-deductible?
Yes, deductible on the business tax return.
