SIMPLE(redirected from SIP for Instant Messaging and Presence Leverage)
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Savings Incentive Match Plan for Employees of Small Employers
A SIMPLE, also known as a SIMPLE IRA, is short for Savings Incentive Match Plans for Employees, an employer sponsored retirement savings plan that may be offered by companies with fewer than 100 employees.
Employers must contribute to eligible employees' accounts each year in one of two ways. They can make a contribution equal to 2% of salary for every employee, or match dollar-for-dollar each employee's contribution to the plan, up to 3% of that employee's annual salary.
A SIMPLE may be set up by establishing an IRA in each employee's name or as a 401(k). Congress sets an annual dollar limit on the tax-deferred amount an employee may contribute, based on the type of SIMPLE it is. Contribution ceilings for SIMPLE-IRAs are lower than for other employer sponsored plans.
You may withdraw assets from a SIMPLE without penalty if you are 59 1/2 or older and retired. And you must begin taking minimum required distributions by April 1 of the year following the year you turn 70 1/2 unless you're still working. Taxes are due on distributions at your regular tax rate.
You may roll your assets over into another employer plan or an IRA if you leave your job for any reason or retire.
Two key differences between SIMPLEs and other employer plans are that your account must be open at least two years before you can withdraw or move the money, and the federal tax penalty for early withdrawal is 25% of the amount you take, rather than 10%.