Mary Beth’s Corner

SIMPLE-ly Time To Upgrade?

Administration
September 26, 2022

SIMPLE plans are just that – simple! Let’s explore the SIMPLE plan design to see if your business owner clients need a retirement plan that can better meet their needs to align with company growth.

A Savings Incentive Match Program for Employees (SIMPLE) plan is geared towards small businesses with 100 or fewer employees. Oftentimes a small employer will utilize a SIMPLE plan to start staff on the road to retirement, but with evolving business goals, they can be quickly outgrown.

Key Differences between SIMPLE and 401(k)

Some of the key attributes for 401(k) Plans can include higher contribution limits, potential for greater tax deductions with a flexible plan design and employer vesting.

The 2022 IRS contribution limits for SIMPLE plans are considerably less at $13,500 ($16,500 for ages 50 and older) as opposed to 401(k) plans that have a $20,500 limit ($27,000 for ages 50 and up). Given these IRS limits, it would take longer to meet income replacement goals when sponsoring a SIMPLE plan.

With a 401(k) plan, employees have additional tax advantage flexibility of contributing Roth deferrals, after tax contributions that grow tax free in retirement, or pre tax deferrals which can be split into different sources that reap tax benefits and allow for owner maximization.

Unlike SIMPLE plans, 401(k) company contributions can have flexible eligibility requirements and vesting schedules, giving employers some protection and flexibility on their investment.

Let’s Talk Timeline

If your client currently has a SIMPLE IRA or SIMPLE 401(k) plan and wants to upgrade to a traditional 401(k) plan for 2023, a Plan termination Notice must be provided to employees by October 1st and plan contributions must cease by December 31st, 2022.

SIMPLE plans must run on a calendar year with a deadline to terminate on November 2nd for a December 31st effective date. Companies that miss the deadline will need to wait until the following year to terminate the SIMPLE.

My Benefits, Your Success

My Benefits wants to see you, our client, recognized by your business owner clients as the expert resource that guides them through the advantages of upgrading from a SIMPLE IRA or 401(k) plan.

While making this change for your growing business owner clients can provide many benefits, it’s not as “simple” as it seems.

My Benefits, LLC is committed to ensure you maintain the most profitable retirement business possible. We help maximize opportunities for your plan(s) by reducing the time and resources you spend and in turn, provide you with an allied approach to better serve your clients.