For example, a small business employer with 5-6 employees originally established a 401(k) plan and during a recent review considered the features of a SIMPLE IRA plan. It may make sense for the employer to terminate the 401(k) plan and adopt a SIMPLE IRA program in its place.
Similar to a 401(k) plan, a SIMPLE IRA program also allows employees to defer income through salary deferral contributions – up to $12,000 in 2013 ($14,500, if age 50 and older). And, the employer contribution commitment is minimal – either 2% of compensation for all eligible employees or a match of 3% (which can be reduced to as low as 1% in some years) of compensation for the employees that are participating.
When terminating a 401(k) plan and adopting a SIMPLE IRA program, here are highlights of some things of which you need to be aware.
For more information regarding SIMPLE IRAs, take a look at the following resources.
And, don’t hesitate to contact the Retirement Strategies Group at (800) 722-2233, ext. 3939 or email RSG@pacificlife.com should you have any questions or want additional information.
* While allowed, not all 401(k) plans may elect to offer loans to participants.
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