One of the best parts of being a bookkeeper is seeing employees smile when they utilize employee benefits. There are a multitude of different employee benefits out there including: 1) Health Insurance, 2) Retirement, 3) Life Insurance, 4) Dental Care, 5) Vision Care, 6) Cancer Insurance, 7) Disability Insurance and 8) Child Care.
Section 408(p) of the Internal Revenue Code sets the law in regards to the Savings Incentive Match Plan for Employees (SIMPLE). It allows the employer to establish a basic retirement plan for any business with less than 100 employees. The employer is allowed to either match an employee elected deferral up to 3% of compensation or provide a flat 2% contribution to an employees Individual Retirement Account (IRA).
There are several different retirement plans available to the small business owner. But no plan offers so many advantages to small business as the Simple retirement plan. The positive attributes include: 1) Easiest to understand, 2) Least amount of paperwork, 3) No compliance reporting and 4) Plenty of flexibility. If you are in business and have less than 25 employees, this is your best option to include a great benefit for your employees. This article describes this form of a retirement plan and Section 408 of the Internal Revenue Code, identifies the advantages, and concludes with a comprehensive example. In addition, I explain how to fill out the proper document to begin the plan.
This is a plan within an allowed set of plans under Section 408 of the Internal Revenue Code. All of us have heard of Section 401(k) plan. The Internal Revenue Code dedicates Sections 401 through 408 to codifying retirement plans. Within Section 408 are the easier to understand retirement plans. They include Simplified Employee Plans (SEPs), Salary Reduction Simplified Employee Plans (SARSEPs) and the Savings Incentive Match Plan for Employees (SIMPLE). Section 408(p) addresses the SIMPLE.