What it is The Advantages Who is eligible What it isn't Contributions What It Is The SIMPLE-IRA, or Savings Incentive Match Plan for Employees-IRA, replaced the SARSEP-IRA for new plans established on or after January 1, 1997. The SIMPLE-IRA is a tax-deferred retirement plan provided by sole proprietors or small businesses (fewer than 100 employees) who do not maintain or contribute to any other retirement plan. Contributions are made by both the employee and the employer. In a SIMPLE-IRA, contributions and the investment earnings can grow tax-deferred until withdrawal (assumed to be retirement), at which time they are taxed as ordinary income. Annually, the maximum employee contribution is $7,000 ($7,500 if age 50 or older), plus your employer's contribution. With the exception of the higher contribution limits, SIMPLE-IRAs are subject to the same rules as a regular IRA. The Advantages Can Also Invest in IRAs Employees with SIMPLE-IRAs can also invest in regular IRAs, giving you another opportunity to save for your retirement. Tax-Deferred Contributions and Earnings Your contributions are taken pre-tax, reducing your taxable salary, and both the contributions and earnings can grow tax-deferred until they are withdrawn. Tax-deferred contributions and earnings make up the best one-two punch in investing. Compare the Results. Employer Contributions In a SIMPLE-IRA, employer contributions can take the form of a 100% match--doubling your money right from the start (up to 3% of the employee's compensation for the year)--or a straight 2% (up to $3,200 per employee) of compensation for all eligible employees, whether or not they contribute to the plan. Who Is Eligible Depending on your company's rules, you may be eligible to contribute to a SIMPLE-IRA in any year you earn a salary and are a regular employee. SIMPLE-IRAs are designed for firms with less than 100 employees. Unlike a SARSEP-IRA, there are no minimum participation requirements. What It Isn't See 401k, SEP-IRA, SARSEP-IRA, and Keogh to learn how other tax-deferred retirement plans offered by businesses differ from the SIMPLE-IRA. To see which retirement plan is right for your business, click here. Contributions Employee contributions are limited to $7,000 annually ($7,500 if age 50 or older), plus your employer's contribution. Employer contributions must be either: 100% match for all employees (up to 3% of your total compensation), or 2% for all eligible employees (to a maximum of $3,200). The tax information provided is for informational purposes only and is not intended, and should not be construed, as tax advice or a recommendation. Intuit does not provide legal, tax, or investment advice and you should consult with a professional tax advisor about your individual circumstances.