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SIMPLE Plans

Looking for a retirement plan that’s easy and cost effective to administer? The Savings Incentive Match Plan for Employees of Small Employers (SIMPLE IRA) may be the perfect solution for your business.

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Contribution Limits for 2025

  • Employees can defer up to $16,500; $20,000 if age 50+; $21,750 if age 60-63
  • Employers match up to 3% of pay or make a 2% nonelective contribution.
  • Additional non-elective contributions up to 10% of compensation or $5,100
  • Higher limits available for employers with fewer than 25 employees.

How to Set up a SIMPLE IRA:

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Eligible if you had 100 of fewer employees in 2024 and no other retirement plan.

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Adopt a written plan using IRS Form 5305-SIMPLE or 5304-SIMPLE.

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Provide employees with plan details and election options before each election period.
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Set up individual SIMPLE IRA accounts for eligible employees.

Advantages & Disadvantages

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Advantages

  • Easy set up and minimal paperwork
  • No complex ERISA compliance or government filings.
  • Flexible employer contributions and immediate vesting.
  • Tax-deductible contributions and ROth options available. 
  • Self-employed individuals can participate.
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Disadvantages

  • Employer contributions required annually.
  • Lower contribution limits compared to 401(k) plans.
  • Early withdrawals subject to penalties (25% in the first two years, then 10%)
  • Cannot maintain other employer-sponsored retirement plans.

SIMPLE IRA vs. 401(k) Comparison

Feature SIMPLE IRA 401(k)
Employee Limit
 100 or fewer Any number
Deferral Limit
 $16,500 - $21,750 $23,500 - $34,750
Roth Contributions
 Yes Yes
ERISA Compliance
 No Yes
Employer Contributions
 Required Optional
Loans
 No Yes
Vesting
 Immediate Schedule permitted

Ready to Start Planning?

Contact First State Financial Management today to learn how a SIMPLE IRA plan can benefit your business and employees.

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