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What Is a SIMPLE?   There are many types of employer-sponsored retirement plans. One that may appeal to small businesses and to self-employed individuals is the savings incentive match plan for employees of small employers (SIMPLE) because, as the name implies, it is easy to set up and administer, and employers are allowed to take a tax deduction for the contributions that are made.   SIMPLEs can be established by small businesses that have 100 or fewer employees  (who were paid at least $5,000 or more in compensation during the previous year) and do not maintain other retirement plans. They can be structured as an IRA for each eligible individual or as part of a qualified cash or deferred arrangement such as a 401(k) plan. Typically, they are structured as SIMPLE IRAs.   Eligible employees (those who earned at least $5,000 in the preceding year) can make pre-tax contributions to their plans each year. Participants may contribute 100% of their salaries up to $10,500 in 2007. Those who are 50 or older during the year can elect to make $2,500 catch-up contributions. These amounts are indexed annually for inflation.   Administrators of SIMPLE IRAs are required to make either matching contributions equal to employee contributions (up to 3% of employee salaries) or non-elective contributions, which set a flat 2% contribution rate for all eligible employees. Employees are immediately 100% vested in contributions made by the employer, and they direct their own investments.   Distribution rules are similar to most IRA plans. Withdrawals are taxed as ordinary income and are also subject to a 10% federal income tax penalty if withdrawn prior to age 59½, unless there are extenuating circumstances as outlined by the IRS. Required minimum distributions also must begin after the participant reaches age 70½.   An additional rule for SIMPLE plans is that there is a two-year waiting period after the date when an employee enrolls in the plan to transfer contributions to another IRA on a tax-deferred basis. Any withdrawals taken during the first two years of an employee’s participation in the plan are subject to a 25% tax penalty in addition to ordinary income taxes. After the first two years, early withdrawals are generally subject to the 10% early-withdrawal penalty prior to age 59½. Of course, the IRS sometimes allows exceptions under special circumstances.   SIMPLE IRAs may be a good choice for small-business owners because the responsibility for funding the plan is shared between the employer and the employee. The start-up and maintenance costs also may be lower than for other qualified plans. If you are considering whether to establish a retirement plan for your business, you may want to make it SIMPLE.                      To speak with someone regarding a SIMPLE,  contact: Faye Bagby (877) 588-3330 Midland Office 1-877-588-3330 All Areas   |
DISCLAIMER: American Financial and Retirement Services, Inc. (“AFRS”) is not a life settlement provider or life settlement broker. AFRS only advises its clients about purchasing or investing in life insurance policies in the tertiary life settlements market and does not work directly with owners of life insurance policies seeking to enter into viatical or life settlement contracts with life settlement providers. The information contained on this website is intended solely for AFRS’s clients who may be interested in tertiary life settlements and is not intended for and may not be relied upon by persons interested in selling their life insurance policies in viatical or life settlement contracts. No information on this website should be construed as being for the purpose of creating an interest in or inducing a person to purchase or sell, assign, devise, bequest or transfer the death benefit or ownership of a life insurance policy or an interest in a life insurance policy pursuant to a life settlement contract. Any individuals interested in selling their life insurance policies in viatical or life settlement contracts should contact any one or more of the life settlement brokers or life settlement providers properly licensed in their state of residence. Void outside the United States and otherwise where prohibited by law. |
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