What Is a 408(p) Retirement Plan?
A simple IRA plan is also known as a 408(p) retirement plan. It is a simplified, tax-favored retirement plan for small employers with fewer than 100 employees. Employees can make salary deferral contributions, and employers must make matching contributions or nonelective contributions.
For 2015, the contribution limits are 100 percent of eligible compensation up to a maximum of $12,500 by the employee and either 100 percent of a 3 percent matching of eligible compensation or, if using the nonelective contribution, 2 percent of eligible compensation up to a maximum of $5,100 by the employer. Distributions from a simple IRA are generally included as income for the year received, and withdrawals before the age of 59 1/2 might be subject to a 10 percent additional tax.