SIMPLE IRA: Business Information

What type of business are you modeling? Help Text

Note: If the sponsoring business is organized under state law as a limited liability corporation (LLC), the appropriate selection for this question will depend on whether the business files a federal return as a partnership (e.g., Form 1065) or as a corporation (e.g., Form 1120).

X

What type of business are you modeling? (Sole Proprietorship/Partnership or Corporation)

The way estimated contributions are calculated for a business owner who is eligible to participate in the plan is dictated by the way the sponsoring business is structured.

If the sponsoring business files its federal tax return as a sole proprietor or partnership (e.g., Schedule C, Schedule F or Form 1065), you should select "Sole Proprietorship/Partnership."

If the sponsoring business files its federal tax return as a corporate entity (e.g., Form 1120 or Form 1120- S), you should select "Corporation."

Note: If the sponsoring business is organized under state law as a limited liability corporation (LLC), the appropriate selection for this question will depend on whether the business files a federal return as a partnership (e.g., Form 1065) or as a corporation (e.g., Form 1120).

SIMPLE IRA: Business Information

XWarning: You have chosen to conduct plan modeling for a future year. The IRS, on an annual basis, publishes updated numbers for various retirement plan calculations and limits (referred to, collectively, as Cost of Living Adjustments, or COLAs). At this time, one or more of the COLA adjustment figures for the year selected is not yet available. Accordingly, the plan modeling projections for the selected year will be approximations based on current-year limitations.
X

Warning: An employer must satisfy the "100-employee limitation" rule to be eligible to maintain a SIMPLE IRA plan. If your business has previously maintained a SIMPLE IRA plan a grace period is granted and you are treated as satisfying the 100-employee limitation for the two calendar years following the calendar year for which the 100-employee limitation was last satisfied. If you exceed the 100-employee limitation, please consult your tax advisor to determine ongoing eligibility to maintain the SIMPLE IRA plan.

X

Warning: If you maintain another employer retirement plan, you are generally not eligible to establish a SIMPLE IRA plan. However, if you maintain another retirement plan for collective bargaining employees, you are permitted to maintain a SIMPLE IRA plan for other employees. Also, if you are maintaining another employer retirement plan as a result of an employer acquisition, merger or similar transaction, consult with your tax advisor to determine if you are eligible to continue maintaining the SIMPLE IRA for the year of the acquisition or merger (and in the following two calendar years).

For what tax year would you like to do contribution/coverage modeling? Help Text

XWarning: 100 employee warning

Does this business employ common-law employees? Help Text

Did the business employ more than 100 employees (including business owners) during the previous year who made $5,000 or more in compensation? Help Text

Did the business maintain any other business retirement plan during the year for contribution/coverage modeling is being performed? Help Text

X

Select the applicable tax year for which you would like to model plan coverage/contributions.

X

A common-law employee is a person who performs services for an employer who has the right to control and direct the results of the work and the way in which it is done.

For example, the employer:

  • Provides the employee's tools, materials, and workplace; and
  • Can fire the employee.

When establishing a business retirement plan, a business must take into consideration all common-law employees when assessing who must be covered under the plan. Generally speaking, the sponsoring business must provide retirement plan coverage for those common-law employees who meet the plan's eligibility requirements. While there are specific circumstances under federal law where a business may exclude certain classes of employees from plan participation, a business may not arbitrarily ignore common-law employees when determining who will be eligible for coverage under a business retirement plan.

If you own multiple businesses, you may be required to cover all employees of all owned businesses under this plan. Review controlled group rules with your tax advisor.

X

SIMPLE IRA plans may generally only be established by employers who employed no more than 100 employees/owners who received at least $5,000 in compensation from the employer for the preceding year. This is commonly referred to as the "100-employee limitation" rule. All employees/owners employed at any time during the calendar year are taken into account, regardless of whether they are eligible to participate in the SIMPLE IRA plan.

X

An employer maintaining a SIMPLE IRA plan may not maintain other employer retirement plans in which employees currently receive contributions or accrue benefits. This requirement is often referred to as the "exclusive plan" rule. For purposes of this requirement, other employer retirement plans include

  • simplified employee pension (SEP) plan,
  • SIMPLE plan,
  • plan qualified under Code section 401(a) such as pension, profit sharing or 401(k) plan,
  • 403(b) arrangement,
  • 403(a) arrangement, or
  • plan established for employees of a State, a political subdivision or by an agency or instrumentality of any State or political subdivision (other than an eligible deferred compensation plan described in IRC Sec. 457(b)).

SIMPLE IRA: Business Owner InformationHelp Text

X

Warning: When adopting a SIMPLE IRA plan, businesses may elect to exclude individuals who are reasonably expected to earn less than $5,000 for the current year (or, a lower dollar threshold selected by the adopting employer). If your plan includes a coverage restriction based on current-year compensation, you should not enter individuals whose compensation for the current year is below this threshold.

If you enter individuals with less than $5,000 in current-year compensation, this tool presumes that either

  1. Your SIMPLE IRA plan does not restrict plan participation based on current-year compensation, or
  2. The compensation for the individuals entered exceeds the dollar threshold for current-year compensation in your plan.

X

The amount entered for "Anticipated Salary Deferral" cannot exceed the lesser of

  1. Estimated Self-Employment Earnings/Estimated W-2 Income or
  2. The maximum salary deferral amount for the applicable year*

*The maximum salary deferral amount for the applicable year is

2023: $15,500 (<Age 50), $19,000 (Age 50+)
2024: $16,000 (<Age 50), $19,500 (Age 50+)
2025: $16,000 (<Age 50), $19,500 (Age 50+)

First
Name

Last
Initial

Year
of Birth

Estimated
Self-Employment Earnings

Anticipated
Salary Deferral

Prior Year(s)
of Service Help Text

  
$ $

During how many years - prior to the year for which you are modeling - did this business owner earn $5,000* or more in compensation from this business?

NOTE: if you have selected (or intend to select) a dollar threshold of less than $5,000 for the plan's prior years compensation requirement, this question should be answered in accordance with the applicable dollar threshold selected in the SIMPLE IRA adoption agreement.

 

+ Add Owners

X

Business Owner Information

Eligibility in the SIMPLE IRA plan is limited to owners and employees who meet both current compensation and prior compensation requirements as outlined in the employer-level SIMPLE IRA plan document. If this individual does not meet the plan's compensation requirements for the modeling year, do not enter the business owner's information on this screen.

First Name: Enter the business owner's first name

Last Initial: Enter the first initial of the business owner's last name

Year of Birth: Enter the business owner's year of birth (YYYY)

Estimated Self-Employment Earnings: Enter the business owner's estimated net earnings from self-employment. Generally, net earnings are equal to the self-employed business owner's gross income from the trade or business (provided the business owner's personal services are a material income-producing factor) minus allowable business deductions. For purposes of this tool, the earnings entered here are presumed to be net earnings prior to any deductions for self-employment taxes and, if applicable, any deductions for retirement plan contributions made on behalf of common-law employees.

Anticipated Salary Deferral: Enter the business owner's anticipated salary deferral amount.

Prior Year(s) of Service: Under a SIMPLE IRA plan, sponsoring businesses may require individuals to have completed up to two (2) prior years of service with the sponsoring employer to be eligible to participate in the SIMPLE IRA plan. As a general rule, individuals must earn $5,000 during a given year to be credited with a year of service (adopting employers may, however, select a lower dollar threshold when adopting a SIMPLE IRA plan). Based on the dollar threshold selected in the SIMPLE IRA plan document ($5,000 or less), indicate whether the individual has accrued 0, 1 or 2+ years of service prior to the year for which plan modeling is being conducted.

X

Business Owner Information

Eligibility in the SIMPLE IRA plan is limited to owners and employees who meet both current compensation and prior compensation requirements as outlined in the employer-level SIMPLE IRA plan document. If this individual does not meet the plan's compensation requirements for the modeling year, do not enter the business owner's information on this screen.

First Name: Enter the business owner's first name.

Last Initial: Enter the first initial of the business owner's last name.

Year of Birth: Enter the business owner's year of birth (YYYY).

Estimated W-2 Compensation: Enter the business owner's estimated gross income reported on IRS Form W-2 (Wage and Tax Statement).

Anticipated Salary Deferral: Enter the business owner's anticipated salary deferral amount.

Prior Year(s) of Service: Under a SIMPLE IRA plan, sponsoring businesses may require individuals to have completed up to two (2) prior years of service with the sponsoring employer to be eligible to participate in the SIMPLE IRA plan. As a general rule, individuals must earn $5,000 during a given year to be credited with a year of service (adopting employers may, however, select a lower dollar threshold when adopting a SIMPLE IRA plan). Based on the dollar threshold selected in the SIMPLE IRA plan document ($5,000 or less), indicate whether the individual has accrued 0, 1 or 2+ years of service prior to the year for which plan modeling is being conducted.

X

Prior Year(s) of Service:

Under a SIMPLE IRA plan, sponsoring businesses may require individuals to have completed up to two (2) prior years of service with the sponsoring employer to be eligible to participate in the SIMPLE IRA plan. As a general rule, individuals must earn $5,000 during a given year to be credited with a year of service (adopting employers may, however, select a lower dollar threshold when adopting a SIMPLE IRA plan). Based on the dollar threshold selected in the SIMPLE IRA plan document ($5,000 or less), indicate whether the individual has accrued 0, 1 or 2+ years of service prior to the year for which plan modeling is being conducted.

X Other Compensation

X Other Compensation?

This modeling tool includes calculations to estimate the self-employment taxes that will by be payable on the business owner's self-employment earnings entered in the "Estimated Self-Employment Earnings/Estimated W-2 Income" field. In situations where the business owner has other taxable compensation for the given modeling year, the calculation assumptions incorporated within this modeling tool may not accurately reflect the business owner's "compensation" for plan contribution modeling.

SIMPLE IRA: Employee InformationHelp Text

X

The amount entered for "Anticipated Salary Deferral" cannot exceed the lesser of

  1. Estimated Self-Employment Earnings/Estimated W-2 Income or
  2. The maximum salary deferral amount for the applicable year*

*The maximum salary deferral amount for the applicable year is

2023: $15,500 (<Age 50), $19,000 (Age 50+)
2024: $16,000 (<Age 50), $19,500 (Age 50+)
2025: $16,000 (<Age 50), $19,500 (Age 50+)
X

Warning: When adopting a SIMPLE IRA plan, businesses may elect to exclude individuals who are reasonably expected to earn less than $5,000 for the current year (or, a lower dollar threshold selected by the adopting employer). If your plan includes a coverage restriction based on current-year compensation, you should not enter individuals whose compensation for the current year is below this threshold.

If you enter individuals with less than $5,000 in current-year compensation, this tool presumes that either

  1. Your SIMPLE IRA plan does not restrict plan participation based on current-year compensation, or
  2. The compensation for the individuals entered exceeds the dollar threshold for current-year compensation in your plan.
Warning: 1.
X Warning: 2
X Warning: 3

First
Name

Last
Initial

Year
of Birth

Estimated
W-2 Income

Anticipated
Salary Deferral

PriorYear(s)
of ServiceHelp Text

  
$ $

During how many years - prior to the year for which you are modeling - did this employee earn $5,000* or more in compensation from this business?

NOTE: if you have selected (or intend to select) a dollar threshold of less than $5,000 for the plan's prior years compensation requirement, this question should be answered in accordance with the applicable dollar threshold selected in the SIMPLE IRA adoption agreement.

 

+ Add Employees

Please check for valid dates. Valid dates include 1900 through the current year.
X

Employee Information

Eligibility in the SIMPLE IRA plan is limited to owners and employees who meet both current compensation and prior compensation requirements as outlined in the employer-level SIMPLE IRA plan document. If this individual does not meet the plan's compensation requirements for the modeling year, do not enter the employee's information on this screen.

First Name: Enter the employee's first name.

Last Initial: Enter the first initial of the employee's last name.

Year of Birth: Enter the employee's year of birth (YYYY).

Estimated W-2 Income: Enter the employee's estimated gross income reported on IRS Form W-2 (Wage and Tax Statement).

Anticipated Salary Deferral: Enter the employee's anticipated salary deferral amount.

Prior Year(s) of Service: Under a SIMPLE IRA plan, sponsoring businesses may require individuals to have completed up to two (2) prior years of service with the sponsoring employer to be eligible to participate in the SIMPLE IRA plan. As a general rule, individuals must earn $5,000 during a given year to be credited with a year of service (adopting employers may, however, select a lower dollar threshold when adopting a SIMPLE IRA plan). Based on the dollar threshold selected in the SIMPLE IRA plan document ($5,000 or less), indicate whether the individual has accrued 0, 1 or 2+ years of service prior to the year for which plan modeling is being conducted.

X

Prior Year(s) of Service:

Under a SIMPLE IRA plan, sponsoring businesses may require individuals to have completed up to two (2) prior years of service with the sponsoring employer to be eligible to participate in the SIMPLE IRA plan. As a general rule, individuals must earn $5,000 during a given year to be credited with a year of service (adopting employers may, however, select a lower dollar threshold when adopting a SIMPLE IRA plan). Based on the dollar threshold selected in the SIMPLE IRA plan document ($5,000 or less), indicate whether the individual has accrued 0, 1 or 2+ years of service prior to the year for which plan modeling is being conducted.

SIMPLE IRA: Results for

Prior Service Requirement? No Prior Service Requirement
Yes, Years of Service

Employer Contribution Method: 100% Matching Contribution up to % of Compensation
2% Nonelective Contribution

X

Warning: Due to the way "compensation" is determined for purposes of calculating plan contributions for unincorporated business owners, under certain circumstances the selection of a higher contribution percentage can lead to the projection of a smaller aggregate contribution amount. You are receiving this warning message because the projected contribution amount for at least one of the covered business owners has reached a threshold where the projected contribution amount is diminishing in response to the selection of higher contribution percentage.

Name

Owner

Eligible

Estimated Aggregate
Contribution

Estimated Employer Contribution/
Anticipated Salary Deferral

 

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Tool Methodology and Assumptions
X

SIMPLE IRA Plan Tool Methodology and Assumptions

  1. Controlled Groups
    If one or more owners of a business has either direct or indirect ownership interests in multiple businesses, the businesses may need to be aggregated and treated as a single business for retirement plan coverage/compliance purposes pursuant to Internal Revenue Code (IRC) Secs. 414(b) and (c). For purposes of this modeling tool, it is assumed that the business for which plan modeling is done is not part of a controlled group under IRC Secs. 4154(b) or (c).

  2. Employee Eligibility Requirements
    Each year for which a SIMPLE IRA plan is effective, the employer must permit salary reduction contributions to be made by all employees who are reasonably expected to receive at least $5,000 in compensation from the business during the year, and who received at least $5,000 in compensation from the employer in any two preceding years. However, an employer may adopt a SIMPLE IRA plan with less restrictive eligibility requirements by eliminating or reducing the prior year compensation requirements, the current year compensation requirements, or both.

    For purposes of calculating plan eligibility, this modeling tool assumes that business owners and employees meet both the both current compensation and prior compensation requirements as outlined in the employer's SIMPLE IRA plan document. Accordingly, if you have business owners and/or employees who do not meet the plan's compensation requirements for the modeling year, such business owners/employees should be excluded when entering data into the plan modeling tool.

  3. Excludable Categories of Employees
    An employer, at its option, may exclude from eligibility employees described in Internal Revenue Code (IRC) Sec. 410(b)(3). These employees are: (1) Employees who are included in a unit of employees covered by an agreement that the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers; (2) In the case of a trust established or maintained pursuant to an agreement that the Secretary of Labor finds to be a collective bargaining agreement between air pilots represented in accordance with Title II of the Railway Labor Act and one or more employees, all employees not covered by that agreement; and (3) Employees who are nonresident aliens and who received no earned income (within the meaning of IRC Sec. 911(d)(2)) from the employer that constitutes income from sources within the United States (within the meaning of IRC Sec. 861(a)(3)). Moreover, during the calendar year in which an acquisition, disposition or similar transaction occurs (or the following calendar year), an employer may exclude from eligibility all of the employees who would not have been eligible if the transaction had not occurred (and thus the employer maintaining the SIMPLE IRA Plan had remained a separate employer). This plan modeling tool assumes that the employees entered are not excludable from plan participation due to one of these exclusions. Accordingly, if you have employees who will be excludable from participation due to one of these exclusions, you should exclude such employees when entering data into the plan modeling tool.

  4. Estimated Self-Employment Earnings
    For a self-employed individual's income from his or her business to be considered eligible compensation for retirement plan contribution purposes, the individual's personal services must generally be a material income-producing factor. For purposes of this modeling tool, it is assumed that amounts entered as "Estimated Self-Employment Earnings" for unincorporated business owners meet this requirement.