Series 7 practice questionmediumRetirement Accounts — SIMPLE IRA
Which of the following is a requirement for an employer to establish a SIMPLE IRA plan?
- AThe employer must have 100 or fewer employees who earned at least $5,000 in the preceding year✓ Correct answer
- BThe employer must have more than 500 employees
- CThe employer must be a publicly traded company
- DThe employer must match employee contributions dollar-for-dollar with no cap
Explanation
Why A — The employer must have 100 or fewer employees who earned at least $5,000 in the preceding year
A SIMPLE (Savings Incentive Match Plan for Employees) IRA is available to employers with 100 or fewer employees who earned at least $5,000 in the preceding calendar year. The employer must not maintain any other retirement plan. Employers are required to either match employee contributions up to 3% of compensation or make a 2% nonelective contribution for all eligible employees.
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