Retirement plans that employers who have 100 or
fewer employees can offer their employees. SIMPLE stands for Savings Incentive Match Plan for Employees,
and these plans allow employees who received at least $5,000 in compensation
from the employer in the preceding calendar year and who meet other
requirements to allocate part of their salary to either a SIMPLE IRA or a
SIMPLE 401(k) plan. The employer may match the contribution up to three percent
of the employee’s compensation below $170,000 or up to two percent of an
employee’s fixed non-elective contributions. Employee contributions are
tax-deductible in the year they are made; employer contributions are taxed upon
An employee was
allowed to allocate up to $6,500 in 2001. That increased to $7,000 beginning in
2002 and increases by $1,000 each tax year until it reaches $10,000 in 2005.
After then, the maximum is adjusted according to cost-of-living increases.