Farmers SIMPLE IRA Plans for Small Business Owners
Jobs created by owners of small businesses have sustained the economic expansion of
the last few decades, and this trend is expected to continue well into the next century.
At the same time, employees are becoming increasingly concerned about planning for
their retirement. Small employers competing for talented employees must be able to
offer attractive beneifts packages. The Farmers SIMPLE IRA can be an important
part of any employee benefits packages offered by small employers.
With all of the day-to-day business concerns you face, offering employees a retirement
plan may seem like a weighty financial and administrative burden. To address this need,
and to make retirement plans more available, Congress created the "Savings Incentive Match
Plan for Employees" for small employers, also known as SIMPLEs. These plans are simple
to administer, and offer contribution options that are both flexible and substantial. With these
new plans, there's no reason for you to put off that all-important retirement plan decision any
longer.
Which employers are eligible for a SIMPLE Plan?
SIMPLE IRAs are generally available to both for-profit and non-profit employers having no
more than 100 employees. However, an employer may generally not have a SIMPLE plan
if it provides benefits under another qualified retirement plan.
How much can be contributed?
The Farmers SIMPLE IRA plan contains features and requirements well suited for small
employers. The SIMPLE IRA plan is a salary deferral-type plan.
Under Farmers SIMPLE IRA plan:
-
Employees may contribute up to $6,000, tax-deferred, each year
-
Employer provide either:
A match of employee deferrals up to 3 percent of compensation,
or
A 2 percent-of-compensation contribution on each eligible employee's behalf
-
Total annual contributions may reach as much as $12,000 per participant
What are the tax benfits?
-
All amounts contributed to a SIMPLE IRA plan are tax-deductible by the
employer
-
Employees are not taxed on salary they have deferred
-
All plan earnings are tax-deferred
Do SIMPLE IRAs require complicated testing?
The complicated, potentially expensive contribution testing found in
many other retirement plans can limit the contributions of the business
owner or the highly compensated, or require additional contribution to
certain employees. This is not true of the SIMPLE IRA plan.
Must all employees be covered?
An employer may place some restrictions on which employees are eligible
to participate in a SIMPLE IRA plan.
Employees cannot be included if:
-
he/she has earned $5,000 or more in compensation from the employer in any two
prior years,
and
-
he/she can be expected to earn $5,000 from the employer in the current year
The employer may:
-
waive, or set less demanding, eligibility requirements
-
exclude certain union employees
-
exclude certian nonresident aliens from SIMPLE IRA plan participation
Can SIMPLE assets be moved?
SIMPLE IRA funds may be rolled over or transfered to another SIMPLE IRA
at any time, and to an IRA after two years. Rollover or transfer to an IRA
before that time will result in an excess IRA contribution.
Does SIMPLE plan participation affect IRA contributions?
Employees who participate in a SIMPLE plan are considered "active
participants" in an employer retirement plan, and their IRA contribution
deductibility may be affected, depending on their income.
How do I get a SIMPLE IRA Plan started?
Your Farmers agent can provide you with an enrollment kit, containing all the
information and forms needed to set up a SIMPLE IRA plan for your business.
Your Farmers agent can also help you and your employees choose a Farmers
Individual Retirement Annuity which best suits your needs.
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| Farmers SIMPLE IRA Plans for Small Business Owners |
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