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Chapter 4. No Plan Is an Island > Savings Incentive Match Plans for Employees

Savings Incentive Match Plans for Employees

The Savings Incentive Match Plan for Employees (SIMPLE) became a reality in 1996 with the passage of the Small Business Job Protection Act and is available to businesses with fewer than 100 employees. With a SIMPLE plan offered by their employer, employees can contribute up to $8,000 per year into what is essentially a scaled-down 401(k) plan. The contribution maximum is $9,000 in 2004, $10,000 in 2005, and indexed thereafter for inflation in $500 increments. Your employer is required to match contributions dollar for dollar up to 3 percent or provide a 2 percent contribution for all employees. Unlike 401(k) plans that have vesting schedules for employer contributions, SIMPLE plans immediately vest all employee and employer contributions, making this plan very portable for employees.

Wake-Up Call

Over 90 percent of those who work for a small business with fewer than 100 employees do not contribute to any formal retirement plan. Reaching your retirement goal without a formal saving plan is a fool's errand.



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