Yes. With a SIMPLE IRA, you must contribute either 2% of compensation for each eligible employee, regardless of participation, or a dollar-for-dollar match of employee salary deferral contributions, capped at 3% of compensation (which may be reduced to as low as 1% in any 2 years during a 5-year period).
You may need to consider establishing a small business 401(k) plan when your business grows to more than 100 employees. A Small Business Financial Solutions Advisor can help you consider your options. Please note: If you decide to establish a
401(k) plan, you would stop contributions to the SIMPLE IRA plan and then start the 401(k). Participants that have been in the SIMPLE IRA plan for over 2 years may roll their SIMPLE IRA assets over to the new 401(k) if it allows for rollovers. Before making any decisions, you should speak with your tax and legal advisor about your situation and the requirements for terminating a plan and establishing a new one.
We have many ways to make managing your retirement plan easier. Our Merrill Lynch E-Contribs for Small Business Retirement AccountsTM provides small business owners with a convenient web-based solution for making contributions to retirement plan accounts, while the Automated Investment Program provides a systematic way to invest in mutual funds on a schedule based on your needs.
SIMPLE IRA contributions will be made through your payroll company and you will be required to send an annual notice to your employees. You do not file IRS Form 5500 as you would with a 401(k) plan.