SIMPLE vs. Sec. 401(k) comparison.

• Author: Peterson, John M.
• Position: Savings Investment Match Plan for Employees - Illustration

1. Major Reasons to Choose a Savings Investment Match Plan for Employees (SIMPLE) Individual Retirement Account (IRA). 1. Avoid 25% benefit limit per employee (Sec. 415). 2. Avoid 15% aggregate deduction limit (Sec. 404). 3. Avoid; $160,000 compensation limit on match. (Sec. 401 (a)(17)). 4. Avoid top-heavy rules and discrimination testing for salary deferrals. 5. Able to reduce match to 1% of compensation in two of every five years. 6. No compliance (Form 5500, Annual Return/Report of Employee Benefit Plan (With 100 or more participants)) costs. 7. Employer has no fiduciary responsibility for participant investment choices. 8. Only option available for governmental entities. 9. Lowest implementation and administrative cost.

2. Major Reasons to Choose a SIMPLE Sec. 401(k) 1. Avoid top-heavy rules and discrimination testing for salary deferrals. 2. Limit employees' in-service withdrawal rights. 3. Limit employee investment options to one financial institution without triggering "designated financial institution" issues. 4. Avoid higher early withdrawal...