SIMPLE IRAs give small-business owners retirement saving options

WASHINGTON (Map, News) - For small-business owners in search of retirement-savings instruments for employees, there are options beyond the traditional 401(k) and IRA.

According to Rick Spivey, partner at financial services firm Crawford Advisors, instruments known as SIMPLE IRAs are becoming more popular with small businesses. He said steep costs connected with administering a 401(k) plan deter many small-business owners from offering the plan to employees.

“The SIMPLE IRAs are becoming more prevalent,” Spivey said in an interview with The Examiner. “You don’t have a third-party administrator. ... It looks and feels like a 401(k) plan but doesn’t come with the administrative costs.”

“SIMPLE IRAs are set up for smaller employers who shy away” from these expenses, he said.

This is because the SIMPLE (which stands for Savings Incentive Match Plan for Employees) IRAs do not require outside agents to manage the money. The savings are placed into an account that only the employee can access. The employee then manages the money without the need for a third-party administrator, sparing the employer the additional cost.

“Pre-tax dollars are going into it,” Spivey said. “It operates very much the same way a 401(k) would operate, with an employee contribution.”

It is only available to employers with no more than 1,000 employees, each of whom earned more than $5,000 in the previous year.

dfrancis@dcexaminer.com

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