Savings Incentive Match Plan For Employees Of Small Employers - SIMPLE

Employer-sponsored retirement programs are fairly common at large companies. After all, things like pension plans or 401(k)s get easier to set up and administer when the company has a sizable employee base.

But what about smaller companies? What kind of retirement plan can you offer when you run a pet grooming business out of your van?

The Savings Incentive Match Plan for Employees of Small Employers (or SIMPLE, for short) represents one type of plan that small businesses can offer. It was created in the mid-1990s, replacing the older SARSEP programs. The program applies to companies with fewer than 100 employees. With it, the smaller firms get tax incentives to contribute to retirement plans for their employees (usually in the form of an IRA).

Typically, the employee contributes some amount, and the sponsor of the SIMPLE plan matches the contribution (up to a pre-set ceiling). However, the plan also calls for the employer to contribute a certain amount, even if an employee doesn't want to contribute her own money.