401 K Plan

SIMPLE 401 (k) ...

The Savings Incentive Match Plan for Employees, or SIMPLE actually comes in two forms:

the SIMPLE IRA and the Simple 401(k).
- A small business owner may want a retirement plan that is easy and affordable.
- This is available to companies with fewer than 100 employees.
- This includes partners and sole-proprietors.

There is still
time to save!

Contributions

Employees can contribute a specified amount per year into their SIMPLE accounts.
The EMPLOYER MUST also make contributions to the employee's accounts.

Advantages

No Participation Requirement	Highly compensated owners can stash away a specified amount per year of his/her pre-tax pay and an additional company match regardless of whether or not any other employees participate.
Low Cost	There are no setup fees for the employer in establishing a SIMPLE Plan. The only real employer cost is in the matching.
Hassle Free	No top heavy or discrimination testing and no IRS forms to file. Employers do complete IRS Form 5304, but it can be completed in about two minutes and is not sent in, it is simply retained by the employer. Minimal reporting requirements to employees.

Minor Drawbacks

Maximum 3% employer contribution and maximum contribution for employees is $6,000 for the Simple IRA, and $7,000 for the Simple 401(k).	A "Non Simple" 401(k) offers a somewhat higher employee contribution limit. However, the top heavy and non-discrimination testing provisions associated with the "Non Simple" 401(k) may prevent the higher compensated employees and/or owners from contributing the full amount.
Mandatory employer contributions	Although the requirement is minimal, employers cannot eliminate matching contributions entirely without terminating the plan.
Withdrawals	Early withdrawals (prior to age 59 1/2 ) may be subject to a 25% penalty tax if taken within the first two years of participation. The normal 10% pre-retirement withdrawal penalty applies after two years of participation.
Participant Vesting	Both employee and employer contributions are 100% vested. Employers can't use the vesting schedule as a financial carrot to induce employees to stay.
Loans are not permitted