This week we discussed Simples, 403(b)s, and 457s. A SIMPLE is a Savings Incentive Match Plan for Employees. SIMPLES are retirement plans for small employers. In order to be considered a small employer, the business must have less than 101 employees who made at least $5,000 last year. SIMPLEs are easy to establish and maintain. There are two types of SIMPLEs, a SIMPLE IRA and a SIMPLE 401(k). The maximum deferral that an employee can contribute is $12,000 with a $2,500 catch-up provision. The employer can either match contributions dollar-for-dollar up to 3% of compensation or can make a 2% nonelective contribution. Characteristics of SIMPLEs are that they are always 100% vested in all contributions. They are tax deductible and grow tax-free. Differing characteristics of SIMPLE IRAs and SIMPLE 401(k)s are that SIMPLE IRAs can be subject to a 25% tax penalty if withdrawn within the first 2 years and SIMPLE 401(k)s may take loans.
A 403(b) is a tax sheltered annuity set up for public schools, educational organizations, and other tax exempt organizations under IRC section 501(c)(3). Employees can contribute up to $17,500 with a $5,500 catch up provision. Employees can also take an additional $3,000 per year for five years as the 15-year catch-up provision. In order to make this extra contribution the employee must have worked for the employer for 15 years. 403(b)s can only be invested in insurance annuity contracts and mutual funds. Loans are permissible for 403(b)s.
A 457 is a non qualified deferred compensation plan for eligible tax-exempt entities, and eligible state government entities. An employee can defer up to $17,500 with an additional $17,500 as a 3-year catch-up provision. In order to be eligible, the employee must be 3 years from retirement and have prior unused deferral amounts.
A 403(b) is a tax sheltered annuity set up for public schools, educational organizations, and other tax exempt organizations under IRC section 501(c)(3). Employees can contribute up to $17,500 with a $5,500 catch up provision. Employees can also take an additional $3,000 per year for five years as the 15-year catch-up provision. In order to make this extra contribution the employee must have worked for the employer for 15 years. 403(b)s can only be invested in insurance annuity contracts and mutual funds. Loans are permissible for 403(b)s.
A 457 is a non qualified deferred compensation plan for eligible tax-exempt entities, and eligible state government entities. An employee can defer up to $17,500 with an additional $17,500 as a 3-year catch-up provision. In order to be eligible, the employee must be 3 years from retirement and have prior unused deferral amounts.