Benefits of a SIMPLE IRA

For Employers

• Contribute to your own retirement and help employees save.
• Low-cost, funded primarily by employee contributions.
• Contributions are tax-deductible for your business.
• Simple administration, with no IRS tax filings required.

For Employees

• Pre-tax contributions reduce taxable income (Traditional).
• Employer contributions through match (up to 3%) or 2% fixed.
• Tax-deferred growth on all contributions.
• Starting in 2026, Roth contributions available for potential tax-free withdrawals.

How it works

Who is eligible

• Businesses with 100 or fewer employees, each earning at least $5,000 in the prior year.
• Employees who earned at least $5,000 in any two previous years are eligible to participate.
• Not available if the employer already sponsors another retirement plan.

Contributions (2025)

• Employee deferral: up to $16,000 (+$3,500 catch-up if 50+).
• Employer: must contribute either a 3% match or 2% fixed for all employees.

Withdrawals

• Tax-deferred until retirement.
• Roth contributions (available in 2026) allow for potential tax-free withdrawals if requirements are met.

Deadlines

• SIMPLE IRA must be established by October 1 of the year you want the plan to start.

What are the tax implications of a SIMPLE IRA?

• For the business/employer, all contributions made to the SIMPLE IRA are tax-deductible for the company.
• Employee Contributions to a Traditional SIMPLE IRA are made pre-tax. I.e. they are not included in the employees income. Contributions and earnings are taxed when the employee withdraws in retirement. 
• Employee Contributions to a Roth SIMPLE IRA are made after-tax. I.e. they are taxed. However, the earnings are not taxed when the employee withdraws funds in retirement.