omplete IRS Form 5305-SIMPLE

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They're simple and affordable to start and administer. Starting 401(k) retirement plans for your team is often an expensive and laborious process. With SIMPLE IRAs, your startup paperwork is minimal. You'll also pay less to start and administer your plan than you would with many other retirement plans.


There's no discrimination testing. Unlike 401(k) plans, SIMPLE IRAs don't require discrimination testing to ensure that your retirement plans benefit all employees equally. The absence of this requirement makes SIMPLE IRAs easier to manage.


There are no filing requirements. You're not required to file any paperwork with the IRS to set up or administer a SIMPLE IRA. You won't have to spend time on this task when you could be working on more important business matters – your SIMPLE IRA provider will handle this need for you.
Cons of SIMPLE IRAs
They have relatively low contribution limits. The SIMPLE IRA 2021 contribution limit of $13,500 and the catch-up contribution of $3,000 in 2021 are smaller than they are with several other plans. Yes, $13,500 is more than twice the contribution limit of traditional and Roth IRAs, but it's about two-thirds of the traditional 401(k) contribution limit. It's also a mere fraction of the 2021 SEP IRA contribution limit, which can reach $58,000 for certain participants.


There's no Roth version. With Roth IRAs, you can choose to pay taxes on contributions and not on withdrawals. SIMPLE IRAs do not allow for this inversion of IRAs' usual tax-deferred salary contributions and taxed retirement withdrawals.


They require employer contributions. If you were to offer your employees 401(k) plans instead of SIMPLE IRAs, you wouldn't have to match any employee contributions (though it would still be a meaningful gesture). However, SIMPLE IRAs fully require employer-matching contributions, potentially making them more expensive in the long run.


They penalize withdrawals. Although the vast majority of retirement plans penalize early withdrawals, not all do, so it's fair to classify this standard retirement plan drawback as a key disadvantage of SIMPLE IRAs.
How to set up a SIMPLE IRA
If the pros and cons above have persuaded you to start a SIMPLE IRA for your business, then you're in luck – setup is typically hassle-free and affordable. Here's how to get started:

C. Although SIMPLE IRAs have no official filing requirements, you may find it useful to complete this form. Alternatively, your SIMPLE IRA provider may fill it out for you, since this form officially designates your provider.


Educate your employees on your SIMPLE IRA. During your SIMPLE IRA setup, tell new zealand whatsapp number your employees about the IRA and explain how their accounts will work. Employees who choose to participate can set the withholdings from their paychecks to fund their accounts and choose the assets into which they want their money invested.


Create individual SIMPLE IRAs for your employees. To officially welcome an employee into your SIMPLE IRA program, you must create a SIMPLE IRA for them individually from your provider's dashboard. This typically takes just a few minutes.
To begin this process, consult our reviews of the best employee retirement plans. You'll find tons of helpful information in these reviews – and before you know it, you might be all set with a SIMPLE IRA that's great for you and your team.