Q:

What is a SIMPLE IRA plan?

A:

Quick Answer

In the term SIMPLE IRA, SIMPLE is an acronym for Savings Investment Match Plan For Employees and is used to describe a type of retirement plan designed for businesses with 100 or fewer employees, notes Investopedia. The plans are considered simple because they involve minimal paperwork by administrators.

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Full Answer

With a SIMPLE IRA (individual retirement account), employers can opt to make a required 2 percent contribution to all employees or match employee contributions up to 3 percent, notes Investopedia. The amount of employee contributions cannot exceed $12,500 in 2015, and employees with other plans cannot contribute more than $18,000 across all plans, including their SIMPLE IRAs, in 2015, notes the Internal Revenue Service.

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