SIMPLE IRA featuring Vanguard investments
A SIMPLE (Savings Incentive Match Plan for Employees) IRA is a retirement plan that allows small business employers and employees to make tax-deferred contributions to the plan. Self-employed individuals, small business owners, and any business with 100 or fewer employees that don't have another existing retirement plan are eligible to open a SIMPLE IRA.
How much can you contribute?
Review the contribution limits below to see if a SIMPLE IRA is the right fit for your business.
Employer contribution limits
- Option 1: Dollar-for-dollar match of employee contributions up to 3% of each employee's compensation (which can be reduced to as low as 1% in any two of five years).
- Option 2: A nonelective contribution of 2% of each employee's compensation. The maximum compensation used to determine this contribution is $330,000 for 2023 and $345,000 for 2024. Contributions are tax-deductible and are required every year. If you choose to make nonelective contributions, you must make them for all eligible employees whether or not they make salary reduction contributions.
Beginning with tax year 2024, SECURE 2.0 allows an employer to make additional nonelective contributions to each employee of the plan in a uniform manner, provided that the contribution may not exceed the lesser of up to 10% of compensation or $5,000 (indexed for inflation). Employers are also permitted to treat student loan payments as elective deferrals for purposes of matching contributions.
Employee contribution limits
- Employees can contribute up to $16,000 for the 2024 tax year ($19,500 for employees aged 50 or older).
Beginning with the 2024 tax year, for eligible employers with 25 or fewer employees, Secure 2.0 increases the annual employee contribution limit and the catch-up contribution at age 50 to 110% of the limits that would otherwise apply for that year. Eligible employers with 26 to 100 employees would be permitted to provide the higher limits, but only if the employer provides a 4% matching contribution or a 3% employer contribution.
Who can participate?
There are no age restrictions for employees to be eligible to participate in the SIMPLE IRA. Employees are automatically eligible if they received at least $5,000 from the employer in any preceding two years and are expected to earn $5,000 in the current year.
Employers can choose less restrictive eligibility requirements. Refer to the IRS SIMPLE IRA Plan FAQs for more details.
Start your plan now
Exclusively Vanguard funds
With the Ascensus SIMPLE IRA featuring Vanguard investments, you can choose from a variety of Vanguard mutual funds.
There is a $25 annual fee per Vanguard fund per account holder in this SIMPLE IRA and a $20 annual fee per participant for custodial services.
With the SIMPLE IRA featuring Vanguard investments, certain employee notifications are required annually—but there are no IRS reporting rules.
- All contributions to your SIMPLE IRA belong to you immediately, and you can withdraw them at any time.
- If you withdraw before age 59½, you're subject to a federal penalty tax of 25% if you take the distribution within the first two years of participating in the plan and 10% if taken after that time. Certain exceptions may apply.
- You'll pay ordinary income tax on any taxable distributions.
- You cannot take a loan from your SIMPLE IRA.
