If You’re Considering a SIMPLE IRA, Be Aware of This Deadline

By Elsie Dudukovich0 Comments

Self-employed individuals looking to boost their retirement savings might consider opening a small business IRA (even if they already have a Traditional or Roth IRA).

Some potential benefits to having a small business plan in addition to an IRA:
  • Multiple retirement accounts offer the potential for more capital for your self-directed investing through partnering on investment opportunities.
  • Multiple retirement accounts allow you to name separate primary beneficiaries for each account.
  • Small business IRAs offer potentially larger contribution limits and tax-deductions than individual IRAs.
What is a SIMPLE?
The Savings Incentive Match for Employees (SIMPLE) was implemented as part of the provisions in the Small Business Job Protection Act of 1996. The SIMPLE IRA was designed to provide a retirement plan with both employer matching and employee contributions to the employee plan for small businesses with 100 or fewer employees who have no other qualified plans.

SIMPLE eligibility
There are two basic eligibility requirements to open a SIMPLE IRA:
  • You have 100 or fewer employees who received $5,000 or more in compensation from you for the preceding two-year period.
    • Per IRS Publication 560: “Any employee who received at least $5,000 in compensation during any 2 years preceding the current calendar year and is reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate. The term "employee" includes a self-employed individual who received earned income.”
  • You do not maintain another qualified plan.
    • Per IRS Publication 560, the plan does not need to include:
      1. Employees who are covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you.
      2. Nonresident alien employees who have received no U.S. source wages, salaries, or other personal services compensation from you.”
Deadline for setting up a SIMPLE IRA plan
Eligible business owners can set up a SIMPLE IRA plan from January 1 through October 1, provided you didn't previously have a SIMPLE IRA plan.

Exceptions apply for new employers and those who previously had a SIMPLE IRA.

IRS Publication 560 provides an in-depth look at small business plans. IRS Publication 4334 focuses on the SIMPLE IRA and may be a resource for those evaluating this option.

Equity Trust Company custodies self-directed SEP IRAs, SIMPLE IRAs, Individual 401(k) plans and Roth Individual 401(k) plans, in addition to Traditional or Roth IRAs, Health Savings Accounts (HSA) and Coverdell Education Savings Accounts (CESA).

Schedule a one-on-one consultation with a Senior Account Executive to learn more about the SIMPLE IRA and other small business plans.