If your small business doesn’t offer its employees a retirement plan, you may want to consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions and help attract and retain employees. For a variety of reasons, a SIMPLE IRA can be a particularly appealing option for small businesses. The deadline for setting one up for this year is October 1, 2019.

The basics

Unlike cash or credit cards, small businesses generally don’t accept bitcoin payments for routine transactions. However, a growing number of larger retailers and online businesses now accept payments. Businesses can also pay employees or independent contractors with virtual currency. The trend is expected to continue, so more small businesses may soon get on board.

As the employer, you can choose from two contribution options:

1. Make a “nonelective” contribution equal to 2% of compensation for all eligible employees. You must make the contribution regardless of whether the employee contributes. This applies to compensation up to the annual limit of $275,000 for 2018 (annually adjusted for inflation).

2. Match employee contributions up to 3% of compensation. Here, you contribute only if the employee contributes. This isn’t subject to the annual compensation limit.

Employees are immediately 100% vested in all SIMPLE IRA contributions. 

Employee contribution limits

Any employee who has compensation of at least $5,000 in any prior two years and is reasonably expected to earn $5,000 in the current year, can elect to have a percentage of compensation put into a SIMPLE IRA.  SIMPLE IRAs offer greater income deferral opportunities than ordinary IRAs, but lower limits than 401(k)s. An employee may contribute up to $12,500 to a SIMPLE IRA in 2018. Employees age 50 or older can also make a catch-up contribution of up to $3,000. This compares to $5,500 and $1,000, respectively, for ordinary IRAs, and to $18,500 and $6,000 for 401(k)s.

A SIMPLE IRA might be a good choice for your small business, but it isn’t the only option. Contact your trusted advisor to learn more about a SIMPLE IRA or to hear about other retirement plan alternatives for your business.

Contact your trusted advisor with any questions.

Retirement savings plans are an ubiquitous employee benefit that have many regulatory and compliance requirements.
As plans reach over 100 employees, annual 401(k) audits are required. According to the US Department of Labor, a small “fraction of employers abuse employee contributions.” The U.S. Department of Labor Employee Benefits Security Administration issued 10 warning signs that pension contributions are being misused.

Ten Warnings Signs:

  1. Your 401(k) or individual account statement is consistently late or comes at an irregular interval.
  2. Your account balance does not appear to be accurate.
  3. Your employer failed to transmit your contribution to the plan on a timely basis.
  4. A significant drop in account balance that cannot be explained by normal market ups and downs.
  5. 401(k) or individual account statement shows your contribution from your paycheck was not made.
  6. Investments listed on your statement are not what you authorized.
  7. Former employees are having trouble getting their benefits paid on time or in the correct amounts.
  8. Unusual transactions, such as a loan to the employer, a corporate officer, or one of the plan trustees.
  9. Frequent and unexplained changes in investment managers or consultants.
  10. Your employer has recently experienced severe financial difficulties.

If you have compliance questions on your employee benefit plan, please contact the SKR+CO audit team.