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Form 5305-SIMPLE MS: What You Should Know

Eligibility: A SIMPLE plan must contain an appropriate amount of cash on hand to provide the matching contribution(s) to your SIMPLE IRA. This amount must be no greater than 50% of the applicable salary.  Example: If a pay period starts on March 30, 2012, with a salary of 50,000, 100% of the SIMPLE IRA contributions will be paid and no more may be used to pay a SIMPLE IRA contribution for any pay cycle after March 31. Your company has established a SIMPLE IRA plan for your employees. Based on your salary and the number of employees, use the following calculations. If you are eligible to contribute to an SIMPLE IRA plan under the Retirement Compensation Threshold (TRT) calculation described for this topic: The annual contribution must equal or exceed 50% of your employees' applicable salary. Maximum Contributions: The SIMPLE IRA contributions may only be made one year at a time. If you are eligible to make such contributions, you may make up to 15,000 per year. Maximum contributions made in a tax year (year-end) can only exceed 10,000 per year. The limit is based upon your SIMPLE IRA contribution limit and the number of SIMPLE IRA members in your company (employee count). For Example: The maximum SIMPLE IRA contributions allowed are 500 during the year. If your salary is 200 per month, and you have one SIMPLE IRA member, you can make up to 5,000 in SIMPLE IRA contributions without exceeding the TTR limit. Example: The maximum SIMPLE IRA contributions allowed are 5000 during the year, and you have five SIMPLE IRAs with up to 10 members. You can contribute the maximum amounts of SIMPLE IRA contributions and earnings in any tax year to meet any contribution limitations. For Example: If your SIMPLE IRA plan has a 500 per SIMPLE IRA yearly contribution limit, you may contribute 500 annually in any tax year to meet the annual 25,000 salary limits in your company. SIMPLE plan participants are required to invest in an employer-sponsored low-cost, taxable brokerage account, if eligible, in order to minimize any potential risk of tax deficiency. The plan should include a minimum of 50 per employee per year for an employer contribution and up to 25 per week for an employer contribution to an SIMPLE IRA.

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