Savings Incentive Match Plan for Employees (SIMPLE)

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If your business has steady income, and you are looking for a retirement plan that allows you and your employees to make contributions, a SIMPLE plan may be right for you. With Merrill Lynch’s SIMPLE Retirement Account (SRA) program, you can benefit from our broad range of investment choices, as well as the advice and guidance of our Financial Advisors.

  • An easy and inexpensive option for businesses with 100 or fewer employees with no other retirement plan
  • Employer contributions are tax-deductible
  • Employees have option of salary deferrals with possible tax advantages
  • Reduced fees and paperwork – no start-up or administration fees, and IRS reporting is not required

SIMPLE Plan Features

Plan description

Merrill Lynch’s SIMPLE Retirement Account (SRA) is a cost-effective, tax-favored retirement program for small business owners. The SRA offers an employee salary-deferral contribution feature, along with a mandatory employer contribution. Contributions are made to SIMPLE individual retirement accounts (SRA/IRAs) maintained by employees.

Plan type

IRA-based.

Plan establishment requirements

Generally, you can establish an SRA program if the following two conditions apply:

  • You have 100 or fewer employees receiving at least $5,000 in compensation for the preceding plan year, and
  • You do not maintain any other qualified retirement plan.

Participant eligibility

Any employee who meets the following two conditions is eligible:

  • Has received $5,000 or more in compensation in any two preceding calendar years, and
  • Is reasonably expected to receive at least $5,000 in the current year. You can establish less restrictive eligibility requirements if you choose.

Employer contribution

Employer contributions are mandatory.

  • Generally, you must match each participating employee’s salary-deferral contribution dollar-for-dollar, up to 3% of that employee’s compensation.
  • Match a percentage of less than 3% but not less than 1% of each employee's compensation, provided the lower percentage is not used in more than two years or any five year period.

Employee contribution

For 2007, employees can defer up to $10,500 of compensation annually. This amount will be increased annually for inflation. For employees age 50 and older, additional catch-up contributions of $2,500 may be possible.

Frequently Asked Questions About SIMPLE Plans

Why would a SIMPLE plan be right for me and for my employees?

With a SIMPLE plan, employees can make salary-deferral contributions to their own retirement accounts. Other plans, such as SEPs and profit sharing plans, do not allow employee contributions. Although a 401(k) plan allows employee contributions, you would have to file IRS Form 5500 each year. With a SIMPLE plan, IRS filing is not required. Therefore, by establishing a SIMPLE plan, your employees benefit by contributing to their retirement, with minimal administration and paperwork for you.

What tax advantages will I receive?

Employer contributions are generally tax-deductible as a business expense. Additionally, if eligible, you may take a nonrefundable income tax credit for 50% of the first $1,000 of administrative and retirement education expenses you may incur in each of the program’s first three years.

My business’s income goes up and down. Should I still establish a SIMPLE plan?

With a SIMPLE plan, employer contributions are mandatory. If your profits tend to fluctuate, you should consider a plan that allows optional employer contributions.

What are my SIMPLE plan responsibilities?

Employers must notify their employees annually of their right to begin making salary-deferral contributions, or to revoke or modify existing contributions.

Is there a vesting schedule for contributions?

All contributions are 100% vested immediately.

Related Products & Services

For your business financial needs:

For your personal financial needs:

For more information call 1.866.4ML-BUSINESS (465-2874) or e-mail us at AskMLBiz@ml.com.

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