Creating an incentive, matching plan for employees often sounds like something that only huge companies with major HR budgets can handle. Your company—with fewer than 100 employees—does not have that. But is it still possible to create an IRA plan that makes sense for employees, allows you to incentivize contributions for retirement, and attract new talent thanks to the benefits package you offer new employees? It is. The Self-Directed SIMPLE IRA is a powerful tool for ensuring that your employees have everything they need to take control over their retirement. And it comes with some benefits that will help you run a company on your terms. Here is what you need to know.
Defining the Self-Directed SIMPLE IRA
It starts by defining the SIMPLE IRA. This is short for the Savings Incentive Match Plan for Employees, or Simple, IRA.
This type of plan is simple, easy to run, and usually comes with low operational costs. You can also decide how much your company will contribute to the employees.
With a SIMPLE IRA, you, as the employer, will choose between two contribution methods every year. The first is a 2% non-elective contribution, in which 2% of the eligible employee’s compensation will be contributed regardless of how much the employee may have deferred. Another option, as we say at our SIMPLE IRA site, is as follows: “3% matching contribution – match of employee’s elective deferrals on a dollar-for-dollar basis up to 3% of the employee’s compensation.”
Who is the Self-Directed SIMPLE IRA For?
There are some businesses that will have a better time with the SIMPLE IRA than others. And there may be certain requirements you have to meet. Here are some things to keep in mind as you explore the possibilities of the SIMPLE IRA:
- Your company should have fewer than 100 employees. The SIMPLE IRA plan is designed for small businesses, not large corporations with 100+ employees. This is important to keep in mind, including for companies who might have fewer than 100 employees but anticipate future hiring growth.
- Investors who are interested in using a Self-Directed plan are eligible to do so with a Self-Directed SIMPLE IRA. This allows investors to open up the SIMPLE IRA to real estate, private lending, LLCs, precious metals, and other nontraditional retirement assets that can broaden the diversity within a portfolio. Investors can also use a traditional retirement investment plan if they so choose.
- SIMPLE IRAs can be beneficial for companies who want to create a retirement plan that attracts employees. In this case, an employer can use SIMPLE IRAs to offer employer-matching plans that also incentivize their employees to put aside money for their retirement. This is not only a great way to incentivize talent to come to your company thanks to the existence of a retirement plan but is a great way to build a company—period.
Is the Self-Directed SIMPLE IRA Right for You?
When you are considering using a SIMPLE IRA, it is often not just about you, but about the employees who might share in your SIMPLE IRA plan. But remember that a SIMPLE IRA may be a flexible way to build a retirement benefits package even if you do not have anywhere close to 100 employees. It is also a great plan that your company can “grow” into, even if you only start out with a limited number of employees.