SIMPLE IRA and SIMPLE 401(k) - Investment & Finance Definition
Retirement plans that employers who have 100 or fewer employees can offer their employees. SIMPLE stands for Savings Incentive Match Plan for Employees, and these plans allow employees who received at least $5,000 in compensation from the employer in the preceding calendar year and who meet other requirements to allocate part of their salary to either a SIMPLE IRA or a SIMPLE 401(k) plan. The employer may match the contribution up to three percent of the employee’s compensation below $170,000 or up to two percent of an employee’s fixed non-elective contributions. Employee contributions are tax-deductible in the year they are made; employer contributions are taxed upon withdrawal.
An employee was allowed to allocate up to $6,500 in 2001. That increased to $7,000 beginning in 2002 and increases by $1,000 each tax year until it reaches $10,000 in 2005. After then, the maximum is adjusted according to cost-of-living increases.Webster's New World Finance and Investment Dictionary Copyright © 2010 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.