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Have 100 or fewer employees and predictable cash flow? Take advantage of easy plan-administration, while offering potential tax advantages to your business and employees. Below, you'll find answers to frequently asked questions about SIMPLE IRA plans, rules, contribution limits and more.

Who contributes to a SIMPLE IRA?

The plan is funded by employee salary deferrals and required employer contributions.

How much are employers required to contribute?

You can choose to contribute a flat 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. If needed, the cap may be reduced as low as 1% for any 2 years during a 5‑year period.Footnote 1

What are the employee contribution limits?Footnote 2

Employees, including business owners, can defer up to $13,500 in 2020 ($16,000 for those age 50 or older) of compensation annually.Footnote 1

Who is eligible to participate in a SIMPLE IRA?

Any employee who received $5,000 or more in compensation in any 2 calendar years and is reasonably expected to earn $5,000 or more in the current year.

What investment choices are available?

A full range of investment choices is available, including stocks, bonds, options, ETFs and well-known mutual funds. You and your employees may also consider a savings IRA from Bank of America, N.A. Learn more about investment choices

How much does it cost to set up and administer a SIMPLE IRA?

There are no setup or administrative fees for your business or your employees.

Does the plan take a lot of time to administer?

Not at all. Merrill helps you save time and effort with Merrill E-Contribs for Small Business Retirement Accounts™ — an easy-to-use web-based contribution service. Go to E‑Contribs

What if I prefer to invest with an advisor?

Managed portfolios and one-on-one advice are not available for the Merrill SIMPLE IRA. However, you and your employees will have access to a full range of investments, step-by-step guidance, easy-to-use tools and award-winning research.Footnote 2 Get help when you want it by meeting with a Financial Solutions Advisor in person or on the phone. Learn more about online investing & trading

What are the advantages for employees?

Interest, dividends, employer contributions and other investment earnings have the potential to grow tax deferred until they are withdrawn at retirement.

When are contributions fully vested?

Employee and employer contributions are 100% vested immediately.

Can participants take a loan or withdraw funds from their SIMPLE IRA before they reach age 59½?

No. Loans are not allowed. Withdrawals before age 59½ are subject to ordinary income tax plus a 10% federal early withdrawal penalty. If funds are withdrawn within 2 years of first participation in a SIMPLE IRA, the early withdrawal penalty is 25% instead of 10%.

What if my business grows beyond 100 employees?

If your business grows, you may wish to consider a Merrill Small Business 401(k). Before making any decisions, speak with your tax and legal advisors about your situation and the requirements for terminating a plan and establishing a new one.

What is the plan establishment deadline?

To fund for the current year, the plan must be established by October 1 of that year. If a business is created after October 1, the plan must be established as soon as administratively feasible (special rules apply).

Is IRS reporting required?

It's not, but employee notification of employer contributions is required annually, typically by November 1 for the upcoming plan year.

Compare small business retirement plans

Need help or have questions?

Call 855.667.9451855.667.9451
Mon-Fri 9 a.m. - 8 p.m. ET to speak with a Financial Solutions Advisor

Important disclosures

Contribution and compensation limits are subject to a cost-of-living adjustment annually pursuant to the Internal Revenue Code. Contribution and compensation limits for subsequent years may vary.
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