401k Recovery Advice

SIMPLE IRA Vs SIMPLE 401(k) Plans

Investopedia |

In Brief...

In Introduction To SIMPLE 401(k) Plans of this series we give an overview of the SIMPLE 401(k) plan and compare it to the traditional 401(k) plan. By contrast, an employer who chooses a SIMPLE IRA is not allowed to maintain any other plan whatsoever while maintaining a SIMPLE IRA. If ABC Company adopts a SIMPLE IRA, Jane may receive a matching contribution of $10,500 (3% of $350,000). If ABC Company adopts a SIMPLE 401(k), Jane would receive no more than $7,350 as a matching employer contribution. This is because ABC Company may consider no more than $245,000 of Jane's compensation for plan purposes (3% of $245,000). Therefore, if ABC Company had elected to make non-elective contributions, Jane's contribution amount would be the same under both plans.

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