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What is a SIMPLE IRA?

The Savings Incentive Match Plan for Employees (SIMPLEs) were created by the Small Business Jobs Protection Act of 1996, effective January 1, 1997. They were designed for employers with 100 or fewer eligible employees that wish to establish a retirement plan for their employees that allows both employer and employee contributions, while keeping plan administration responsibilities to a minimum.

Contribution Opportunities
Eligible employees have the ability to defer current income into the SIMPLE IRA plan pretax. Employees can contribute 100 percent of earned income up to $10,500. Employees 50 and over have the ability to contribute an additional $2,500, for a total salary contribution limit of $13,000. The SIMPLE IRA allows employers the flexibility to choose and change the percent of your employees' earnings that you wish to match in the plan. You can select between a three percent matching contribution (up to $10,500 per participant and match as little as one percent for any two years in a five-year period) or a two percent nonelective contribution.

Benefits of a SIMPLE IRA
Both financial organizations and employers enjoy the simplicity of SIMPLEs. An employer establishing a SIMPLE plan will enjoy both tax benefits and nontax benefits.

Employer Benefits

• Employer contributions to a SIMPLE Plan are tax deductible.
• Earnings on employer contributions are not taxable to the corporation.
• The employer may have a better chance to attract and retain high quality employees.
• Employee morale may improve.
• Productivity may improve.

• Employer contributions and employee salary deferrals are not taxed until withdrawn from the plan.
• Earnings on plan assets are not taxed until withdrawn from the plan.
• SIMPLE plans may produce high employee morale.

Flexible, Diversified Investment Options
Waddell & Reed offers you investment diversification and flexibility with many different investments, including aggressive growth funds, growth and income funds, bond funds, income funds and even a money market fund. Not only can you design your own investment strategy, you'll have the opportunity to change allocations should individual goals call for a change in your portfolio.

Payout flexibility at termination or retirement
Employees may make withdrawals in any amount and at any time, however, withdrawals prior to age 59½ may be subject to penalties and income tax. Special penalties may apply for withdrawals made before the SIMPLE IRA account is two years old. For your convenience, the IRS minimum withdrawals are automatically made for you beginning at age 70 ½.

For more information, contact your Waddell & Reed financial advisor.