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Retirement Planning
SIMPLE-IRA

A SIMPLE-IRA is a tax-deferred retirement plan provided by sole proprietors or small businesses (fewer than 100 employees) who do not maintain or contribute to any other retirement plan. This plan allows you to provide a retirement program for yourself and your employees without the administrative expenses, government reporting requirements, and complexity associated with many other types of retirement plans, such as 401 (k) plans. In a SIMPLE-IRA, contributions and investment earnings can grow tax-deferred until withdrawal (assumed to be retirement), at which time they are taxed as ordinary income.

Eligibility
SIMPLE-IRA is available to businesses that:

  • Are a sole proprietorship, partnership, corporation, or tax-exempt organization.

  • Employ 100 or fewer employees who each received at least $5,000 in compensation from the company during the previous year.

  • Do not currently maintain another company-sponsored plan (SEP, SAR-SEP, Keogh, 401(k), or other).


Contributions
Annually, the maximum employee contribution is $10,000 plus the employer's contribution. Employers contribution can be a match of up to $10,000 (or 3% of the employee's compensation for the year, whichever is lower). Employers may elect to match a lower percentage, but it cannot be lower than 1% of the employee's compensation. This lower option is only allowed in two of any five years.

Alternatively, the employer may elect to contribute a flat 2% of each employee's compensation rather than a match. With this election, employers must contribute for each eligible employee regardless of whether the employee participates in the plan.

Individuals over the age of 50 may be eligible for a $2,000 annual "catch-up" contribution.

Deductibility
Employee's contributions are considered pre-tax contributions and are not included in your gross income. Employer's contributions are not taxable either. There is no need to file any separate form with the IRS.

Withdrawals
Withdrawals may incur a 25% penalty if you make them during the first two years. You may also include a tax penalty of 10% if you make a withdrawal before reaching the age of 59 1/2. Please contact Value View to learn about exceptions to the 10% penalty.

 
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