Editing SIMPLE IRA (section)

==Rules==
*Only an "eligible employer" may establish a SIMPLE IRA.  An eligible employer is one with no more than 100 employees. An employer who has already established a SIMPLE IRA may continue to be "eligible" for two years after crossing the 100-employee limit.
*Employees are not required to make regular IRA contributions to their SIMPLE IRA account.
*A SIMPLE IRA requires a certain minimum contribution from the employer. The employer may either: 
** Match the contributions of each employees dollar-for-dollar up to 3% of the employee's compensation (or a smaller percentage in certain cases); or 
** Contribute a flat 2% of the compensation for each employee with at least $5,000 in compensation for the year, regardless of the amount the employee contributes.<ref>{{cite web |url= https://www.irs.gov/Retirement-Plans/Choosing-a-Retirement-Plan-SIMPLE-IRA-Plan |archive-url= https://web.archive.org/web/20210515122721/https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-simple-ira-plan |archive-date= May 15, 2021 |work= Internal Revenue Service |title= Choosing a Retirement Plan: SIMPLE IRA Plan |date= November 23, 2020 }}</ref><ref>{{Cite web|url=https://money.cnn.com/retirement/guide/IRA_SIMPLE.moneymag/ |title=What is a SIMPLE IRA? |work= CNN Money |publisher=CNN |archive-url= https://web.archive.org/web/20201203022634/https://money.cnn.com/retirement/guide/IRA_SIMPLE.moneymag/ |archive-date= December 3, 2020 }}</ref><ref>{{Cite web 
|url=http://www.investopedia.com/university/retirementplans/simpleira/ |title=SIMPLE IRA |work= Investopedia |last=Kagan |first=Julia |date= November 26, 2021 |language=en-US|access-date= September 2, 2016 }}</ref>
*Employees who are not yet age 50 are allowed to contribute up to $14,000 in 2022.<ref name="2021limits">{{cite news|url=https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-simple-ira-contribution-limits |title= Retirement Topics - SIMPLE IRA Contribution Limits |work= Internal Revenue Service |date=November 8, 2021 |access-date= May 27, 2022 }}</ref> Participants who are age 50 or older are allowed to contribute $17,000 for 2022.<ref name="2021limits" /> These limits are different from the limits that apply to 401(k), 403(b), and [[457 plan]]s.<ref name="IRS 2022 limitations announcement">{{cite web |url= https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits |title= Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits |work= Internal Revenue Service |date= November 5, 2021}}</ref>
*The SIMPLE plan can technically be funded with either an IRA or a 401(k). There is almost no benefit to funding it with a 401(k), because the lower contribution limits of the SIMPLE are required as is the expensive extra administration of the 401(k).
*An employee is allowed to make a direct rollover from a SIMPLE IRA into a Traditional IRA after at least two years has passed from the date the employee first participated in the plan.
*An employee is allowed to make a direct rollover from an IRA, a 401(k), or a 403(b) into a SIMPLE IRA after two years of participation. An employee is allowed to make a direct rollover from another SIMPLE plan into a SIMPLE IRA during the first two years of participation in a SIMPLE IRA.<ref>"[https://www.irs.gov/pub/irs-pdf/p4334.pdf SIMPLE IRA Plans for Small Businesses]". ''Internal Revenue Service''. 2020.</ref>

If a participant, who is not yet 59½ years old, wishes to take a distribution and it has been less than two years since their first contribution into the plan, they could be required to pay a penalty of up to 25% (10% if more than two years) to the Internal Revenue Service. This two-year rule applies to all distributions, including rollovers from the SIMPLE IRA. Any amount withdrawn and not rolled over, regardless of age, is also subject to ordinary income tax for the year in which the distribution is made.