A qualified retirement plan can help your firm look more attractive to qualified employees. Finding quality employees can be a challenge today, especially when a job seeker is considering multiple job offers.
Lower income taxes
As a business owner you are able to match the contributions made by your employees. Your matching contributions (up to acceptable limits) are tax deductible. When starting a plan, you may also qualify for an additional tax credit.
Invest in your own retirement
You can invest money for your own retirement in the plan you set up for your employees. And, thanks to tax-free compounding of retirement plans, you’ll unlock financial freedom for your future.
Frequently asked questions
Who can set up a SIMPLE Plan?Atticus2021-11-17T17:47:43-06:00
Any employer (including self-employed individuals, tax-exempt organizations, and governmental entities) that had no more than 100 employees with $5,000 or more in compensation during the preceding calendar year can establish a SIMPLE IRA plan. For purposes of the 100-employee limitation, you must take into account all employees employed at any time during the calendar year, including those employees who have not met the plan’s eligibility requirements. You don’t need to set up a corporation or limited liability company to have a SIMPLE Plan. This means that you can set up a SIMPLE Plan if you are a freelancer, a hairdresser, a consultant, a contractor, or a baker who sells cookies to your friends and neighbors.
Consult your tax advisor if you are uncertain whether the structure of your business will allow for a SIMPLE Plan.
What are the benefits of a SIMPLE Plan?Atticus2021-11-17T17:57:34-06:00
SIMPLE IRA plans can provide a significant source of income at retirement by allowing employers and employees to set aside money in retirement accounts. There are many benefits to establishing a SIMPLE Plan:
Easy to set up (with Atticus) and lower administrative requirements when compared to other retirement plans
Higher contribution limits than Traditional or Roth IRAs
Reduces taxable income for employers and employees that contribute
No filing requirement for the employer
Available to any small business – generally with 100 or fewer employees
Employees are always 100% vested in (or, have ownership of) all SIMPLE IRA money
How and when can I access my money in my SIMPLE IRA?Atticus2021-11-17T21:29:07-06:00
You are allowed to take a distribution at any time however all distributions will be included in your taxable income the year they are made. In addition, if you are younger than 59 ½ when the distribution is made, the amount may be subject to an additional 10% tax (early withdrawal penalty). If this withdrawal occurs within the first 2 years of participation, the 10% tax is increased to 25%.
To take a distribution, you will be required to provide Atticus with the distribution details by completing a form available to you in your account dashboard.
I have employees. Can I add them to my Atticus SIMPLE Plan?Atticus2021-11-17T21:32:46-06:00
Yes, you can. The IRS requires you to include eligible employees in your plan and Atticus makes it easy with our roster management tools—simply provide their name and email address and we will invite them to join your plan and open their own Atticus account.
How much can employees contribute to their SIMPLE IRA each year?Atticus2021-11-17T22:16:13-06:00
For the 2022 tax year, employees may contribute up to $14,000 ($13,500 for 2021) via salary reduction contributions (elective deferrals). For employees age 50 or older, a $3,000 “catch-up” contribution is also allowed (this “catch-up” contribution limit is the same for 2022 and 2021). See IRS Publication 560 for more information. The IRS regularly updates the maximum allowable contribution amount each year.
On top of employee referrals, employers are required to contribute to employee SIMPLE IRA Plans as well. See the “How much can employers contribute to their employee’s SIMPLE IRAs each year?” section below for more information.
Please consult with your tax advisor for assistance with calculating your allowable and recommended contribution amount.
How much can employers contribute to their employees’ SIMPLE IRAs each year?Atticus2021-11-17T22:31:19-06:00
Employers must annually choose one of the contribution methods below. Employers must tell employees during the election period which method will be used for the following year:
2% nonelective contribution – 2% of each eligible employee’s compensation regardless of whether or how much the employee deferred, or
3% matching contribution – match of employee’s elective deferrals on a dollar-for-dollar basis up to 3% of the employee’s compensation.
Employers may choose to reduce the 3% limit to a lower percentage, but in any event, not lower than 1%. Employers may not lower the 3% limit for more than 2 calendar years out of the 5-year period ending with the calendar year the reduction is effective.
Employers cannot make any other contributions to a SIMPLE IRA plan.
Employers should consult with their tax advisors for assistance with deciding which contribution method to select for their business and employees.
Do I have to contribute the same percentage of salary for all of my employees?Atticus2021-11-17T22:12:11-06:00
Yes, you can. For employees age 50 or older, a $3,000 “catch-up” contribution is allowed (this “catch-up” contribution limit is the same for 2022 and 2021). See IRS Publication 560 for more information. The IRS regularly updates the maximum allowable contribution amount each year.
Do employees have to contribute to their SIMPLE IRA Plan every year?Atticus2021-11-17T22:19:37-06:00
Yes, employers must contribute to all eligible employees’ SIMPLE IRAs every year.
The exception here is that if the SIMPLE Plan is set up with the 3% matching contribution and an employee does not contribute to their SIMPLE IRA, the employer is not required or able to contribute to this employee’s SIMPLE IRA as there is no contribution to match.
Are my SIMPLE contributions tax-deductible?Atticus2021-11-17T22:36:45-06:00
The contributions you make to your and your employees’ SIMPLE Plans are tax-deductible up to certain limits. If you are self-employed, there is a special computation to determine your deductible amount. See the IRS website for additional details and consult your tax advisor regarding the specific deductible limits applicable to you.
Are my SIMPLE contributions to my employees’ SIMPLE IRAs taxable to those employees?Atticus2021-11-17T22:43:43-06:00
Contributions made to your employees’ SIMPLE IRAs are not taxable income for them. However, any distributions taken from their SIMPLE IRAs would be included in income and subject to applicable taxes. Atticus will provide each employee with a tax form with contribution details every year.
If I participate in a SIMPLE Plan, can I continue to make contributions to a Traditional or Roth IRA?Atticus2021-11-17T22:45:28-06:00
Yes, you can still contribute to a Traditional or Roth IRA if you participate in a SIMPLE IRA. The total amount you can contribute to a Traditional and/or Roth account is $6,000 ($7,000 if you’re age 50 or older by the end of the year), or 100% of your compensation, whichever is less.
What are my administrative responsibilities for my SIMPLE Plan?Atticus2021-11-17T22:59:04-06:00
To establish an Atticus SIMPLE IRA Plan you need to complete IRS Form 5305-SIMPLE (which we’ll provide you). In addition, if you have eligible employees, you must add them to your SIMPLE Plan and provide them with a copy of your completed Form 5305. You are required to notify your eligible employees about any SIMPLE contributions that you make to their SIMPLE IRAs annually. Atticus provides this to employees on your behalf annually by distributing a Form 5498 to participants who establish Atticus SIMPLE IRAs. Other than your regular tax filings, there are no additional annual reporting or filing requirements.
Do I need to include 1099 contractors in my SIMPLE Plan?Atticus2021-11-17T23:17:56-06:00
No, you don’t. The IRS requires you to include all eligible employees in your SIMPLE plan, but independent contractors are not considered employees for purposes of your SIMPLE and may be excluded. You may also choose to exclude employees that participate in a union.
Generally speaking, an employee (including a self-employed individual) becomes eligible when they’ve:
earned at least $5,000 in compensation during any 2 years before the current calendar year and
expect to receive at least $5,000 during the current calendar year.
An employer can use less restrictive participation requirements, but not more restrictive ones. For example, an employer can eliminate or reduce the prior or current year compensation amounts. Employers cannot impose any other conditions for participating in a SIMPLE IRA plan.
You should speak to your tax advisor to determine how your employees are classified and if they should be included in your plan. You can also view more about the IRS eligibility rules and definition of employees using the links below.