What is a Simple IRA?

A Savings Incentive Match Plan for Employees IRA, or Simple IRA, is a type of individual retirement account that is best fit for small businesses with 100 or fewer employees. Simple IRAs have reduced paperwork requirements – a starting plan document and yearly employee disclosures. Requirements are as follows: the employer who is setting up the account must have 100 or fewer employees; employees must have earned a minimum of $5,000 in pay throughout any two previous years, and must file for expecting to earn $5,000 in the current year. Annual contributions are a requirement for Simple IRAs, and employers have the option to make contributions of 2% of their employee’s salary, or a dollar-for-dollar matching amount ranging up to 3% of their salary.