9.7.4 Savings Incentive Match Plan for Employees (SIMPLE)
To replace the SARSEP, the Savings Incentive Match Plan for Employees (SIMPLE) was created. Small businesses with no more than 100 employees who received at least $5,000 in compensation from the employer during the previous year are eligible to set up for a SIMPLE providing the employees with tax-favored retirement savings plans. The deferred amount per year plus COLA increases - is matched by the employer dollar-for-dollar up to an amount equal to 3% of the employee's annual compensation or the employer can make nonelective contributions of 2% of compensation on behalf of each eligible employee.
Catch-up Contributions
Both SARSEP and SIMPLE plans allow employees 50+ years of age to make additional contributions (catch-up contributions).
SIMPLE plans can be structured as an IRA or as a 401(k).
