Retirement Plan Designed for Small Businesses
Easy retirement plan set up with minimal administration, costs, & work
Business SIMPLE IRA Testimonial
Langan Financial Group goes above and beyond to help my business and our employees feel comfortable with our company's SIMPLE IRA.
Besides setting up and managing our retirement plan, LFG comes on site to meet with employees and provide one on one financial planning.
They are extremely attentive and help customize the individual financial planning according to each person's needs. I highly recommend them.
What is a SIMPLE IRA Plan?
A SIMPLE IRA, is also known as a Savings Incentive Match Plan for Employees. It is a very common small business retirement plan employers can offer to help their employees with retirement planning.
Who is a SIMPLE IRA Plan Right for?
SIMPLE IRA plans are ideal for start-up businesses, it even says so on the IRS' website!
In addition to start-ups, these plans are great for small businesses and organizations that want to minimize administrative burdens, while still offering retirement plan benefits.
Administrative burdens are reduced as SIMPLE IRAs do not require the same reporting requirements and paperwork that other qualified retirement plans have such as 401(k)s.
SIMPLE IRA Employer Contributions Requirements
Employers have two contribution limit options:
- Option 1 is a 2% nonelective contribution. This means each eligible employee receives a 2% contribution of their compensation, regardless of if or how much they defer.
- Option 2 is a 3% matching contribution on a dollar-to-dollar basis. Employers may reduce the 3% to a lower percentage, but no lower than 1% temporarily.
This is only for no more than two calendar years out of the five-year period ending with the calendar year the reduction is effective.
SIMPLE IRA Plan Criteria
Setting up a SIMPLE IRA Retirement plan is easy to do. The criteria is:
- No more than 100 employees with $5,000 or more in compensation during the preceding calendar year.
- This requirement includes any employees, including those who did not meet the plan's eligibility requirements, hired during the calendar year.
3 Steps to Set Up a SIMPLE IRA Plan
If you meet the above requirement, there are three steps to set up a SIMPLE IRA:
- Adopt a plan document
- Educate each eligible employee about the SIMPLE IRA plan
- Create an individual retirement account for each eligible employee according to IRS requirements
SIMPLE IRA Plan Timing Requirements
When setting up a SIMPLE IRA retirement plan, organizations must plan ahead of time as there are timing requirements.
These timing requirements are flexible, allowing an employer to set up a the plan effective between January 1st through October 1st.
There is an exception to new organizations that come into existence after October 1st of the year. Those establishments are able to set up a SIMPLE IRA retirement plan as soon as administratively feasible.
In addition, these plans may only be maintained on a calendar year basis, regardless of the entity's fiscal year.
2023 SIMPLE IRA Contribution Limits
While SIMPLE IRAs may be great for organizations with minimal employees and cash flow, a major con is the contribution limitations.
Employees may defer up to $15,500 in 2023 for SIMPLE IRA plans, with an additional $3,500 for individuals ages 50 and over with the catch-up provision for a total of $19,000.
For 401(k)s, in 2023, employees can contribute up to $22,500 with an additional $7,500 in the catch-up provision, for a total of $30,000 a year in 2023.
This is a significantly lesser amount for SIMPLE IRAs and can impact participants trying to maximize their retirement benefits or catch up on their retirement savings.
SIMPLE IRA Employee Eligibility
An employee can join a SIMPLE IRA if:
- Earned at least $5,000 in compensation during any 2 years before the current calendar year
- Expects to receive at least $5,000 during the current calendar year
These eligibility requirements are the most restricted an employer can allow a plan. If he or she so chooses, they can loosen the eligibility requirements for participants to join.
There are two exceptions, however, to the above rule. An employer can exclude the following employees the plan if:
- Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and the employer
- Nonresident alien employees who do not have U.S. wages, salaries or other personal services compensation from the employer
SIMPLE IRAs Pros
The Savings Incentive Match Plan for Employees' major advantages include:
- Easy to set up
- Easy to operate
- Tax credits for employers
- As of 2023, SIMPLE IRAs can do Roth Contributions
When setting up a SIMPLE IRA, the IRS allows 50% of the organization's eligible startup costs up, however, there are stipulations. The credit is the greater of:
- $500 or
- The lesser of: $250 multiplied by the number of non-highly compensated employees who are eligible to participate in the plan, or $5,000.
SIMPLE IRAs Cons
While there are several advantages to the SIMPLE IRAs, there are a few disadvantages as well, including:
- Employee limitation. Employees cannot be over 100.
- Total annual contribution limits
- No loans
- Mandatory employer contributions
SIMPLE IRA Advisors
Langan Financial Group's SIMPLE IRA advisors are retirement plan specialists for small businesses.
We help small businesses determine the right retirement plan for them and their employees. We have set up, managed, and transitioned numerous plans.
Whether you have a few questions about your plans, are interested in a retirement plan benchmark, or are curious about what additional value we can provide your organization and its employees, we are here to help.
Can Your SIMPLE IRA be Improved?
Langan Financial Group's SIMPLE IRA advisors have over 100 years of experience servicing retirement plans for organizations.
We have an experienced, highly educated team that specializes in retirement plan programs for organizations. In fact, one retirement plan advisor is a licensed attorney specializing in ERISA law, the law that governs retirement plan regulations.
While this individual does not practice law on behalf of Langan Financial Group, this perspective allows our team a deeper insight into setting up and managing retirement plans for organizations.
Give us a call at 717-288-1880 to see how our local advisors can help with your retirement plans. Or visit our retirement plan advisor contact page to fill out an inquiry.
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Disclosure: Check the background of your financial professional on FINRA's BrokerCheck. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Cambridge and Langan Financial Group, LLC. are not affiliated. Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC, to residents of: AL, AZ, CO, DE, FL, GA, IA, KY, MD, NJ, NM, NY, NC, OH, PA, TX, VA, WI Cambridge and Langan Financial Group does not offer legal advice. Estate planning services are in regards to your overall financial plan. Always be sure to speak to a legal professional in regards to specific legal matters. Fixed insurance services offered through Langan Financial Group.
Testimonial/Endorsement Disclosure: The testimonials may not be representative of the experience of other customers. The testimonials are no guarantee of future performance or success. All of the testimonials/endorsements are clients with the exception of Steven Martinez of York SPCA. There was no cash nor non-cash compensation for any of the testimonials provided.
© Langan Financial Group
Harrisburg, PA Office
Address: 1863 Center St, Camp Hill, Pa 17011
Phone: 717-288-1880
York, PA Office
Address: 3405 Board Rd, Suite 200, York, Pa 17406
Phone: 717-773-4085
