Millions of people working for companies with 100 or fewer employees could benefit from the small business pension plan, called SIMPLE IRA, or Savings Incentive Match Plan for Employees.

  WHAT IS A SIMPLE IRA

A SIMPLE (Savings Incentive Match Plan for Employees) plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees.

 
A SIMPLE plan is a written agreement (salary reduction arrangement) between an employer and an employee that allows an eligible employee (including a self-employed individual) to choose to:

These contributions are called salary reduction contributions.
 
Each participant under the SIMPLE IRA may establish his or her own SIMPLE IRA account at the institution of his or her choice.

  More Info On SIMPLE IRAs:

 
Employees can make pre-tax salary deferral contributions of up to a maximum dollar amount determined by law.
 
 Please contact one of our IRA specialists for the current dollar limit

There is a "catch-up" contribution allowed for participants who turned age 50 prior to December 31, 2002.

The employer is required to make a match to each employee who has deferred pre-tax dollars into his/her IRA, or the employer may choose to make a "nonelective" contribution to all eligible employees whether the employee defers or not.

All employees and employer contributions are fully vested and tax-deferred until withdrawn.

When withdrawn, SIMPLE IRAs are taxed as ordinary income.  Generally, withdrawals before two years of participation are subject to an additional penalty of 25% (unless you are 59½ or older or meet other exceptions).
 ~After this two-year wait, the rules applicable to Traditional IRAs apply.