Retirement Plan Designed for Small Businesses
Easy retirement plan set up with minimal administration, costs, & work
Business SIMPLE IRA Client Testimonial
Langan Financial Group goes above and beyond to help my business and our employees feel comfortable with our company's SIMPLE IRA.
Besides setting up and managing our retirement plan, LFG comes on site to meet with employees and provide one on one financial planning.
They are extremely attentive and help customize the individual financial planning according to each person's needs. I highly recommend them.
A note about this testimonial: The individual providing the testimonial above is a current client of Langan Financial and was not compensated for providing their testimonial. The testimonial reflects their individual experience and is not representative of the experience of all clients.
What is a SIMPLE IRA Plan?
A SIMPLE IRA, is also known as a Savings Incentive Match Plan for Employees. It is a very common small business retirement plan employers can offer to help their employees with retirement planning.
Who is a SIMPLE IRA Plan Right for?
SIMPLE IRA plans are ideal for start-up businesses, it even says so on the IRS' website!
In addition to start-ups, these plans are great for small businesses and organizations that want to minimize administrative burdens, while still offering retirement plan benefits.
Administrative burdens are reduced as SIMPLE IRAs do not require the same reporting requirements and paperwork that other qualified retirement plans have such as 401(k)s.
SIMPLE IRA Employer Contributions Requirements
Each year, employers sponsoring a SIMPLE IRA must select one of two required contribution methods:
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2% nonelective contribution: The employer contributes 2% of compensation for every eligible employee, whether or not the employee contributes. For 2026, compensation used in this calculation is generally limited to $360,000.
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3% matching contribution: The employer matches participating employees’ contributions dollar for dollar, up to 3% of compensation.
An employer may temporarily reduce the matching rate below 3%, but not below 1%. The reduced rate may be used for no more than two years during the five-year period ending with the year of the reduction. Employees must receive advance notice.
SECURE 2.0 also permits employers to make an additional uniform nonelective contribution of up to the lesser of 10% of an eligible employee’s compensation or $5,300 in 2026. Special contribution requirements may apply when certain employers adopt the higher SIMPLE IRA employee deferral limit.
SIMPLE IRA Plan Criteria
Establishing a SIMPLE IRA retirement plan can be relatively straightforward. To generally qualify, an employer must:
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Have no more than 100 employees who earned at least $5,000 during the preceding calendar year.
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Count all employees who met that compensation threshold and worked at any point during the year—even if they were not eligible for the plan or chose not to participate.
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Generally not maintain another employer-sponsored retirement plan during the same calendar year, although limited exceptions apply.
If an employer with an existing SIMPLE IRA later exceeds the 100-employee limit, the plan may generally continue for the following two calendar years. Special rules may apply following an acquisition, disposition or similar business transaction.
3 Steps to Set Up a SIMPLE IRA Plan
If you meet the above requirement, there are three steps to set up a SIMPLE IRA:
- Adopt a plan document
- Educate each eligible employee about the SIMPLE IRA plan
- Create an individual retirement account for each eligible employee according to IRS requirements
SIMPLE IRA Plan Timing Requirements
Employers should plan ahead when establishing a SIMPLE IRA retirement plan, as specific timing requirements apply.
An employer that has not previously maintained a SIMPLE IRA may generally establish a plan with an effective date between January 1 and October 1. The effective date cannot be earlier than the date the plan is established.
A new business created after October 1 may establish a SIMPLE IRA as soon as administratively feasible. However, if the employer, or a predecessor employer, previously maintained a SIMPLE IRA, a new plan generally must become effective on January 1.
SIMPLE IRA plans must operate on a calendar-year basis, regardless of the employer’s fiscal year.
2026 SIMPLE IRA Contribution Limits
While a SIMPLE IRA may offer smaller employers a streamlined way to provide retirement benefits, its lower employee contribution limits can be a drawback for participants seeking to maximize their savings.
For 2026, the standard employee contribution limits are:
- SIMPLE IRA: Employees may defer up to $17,000. Participants ages 50–59 or 64 and older may contribute an additional $4,000, for a total of $21,000. Participants ages 60–63 have a higher catch-up contribution of $5,250, bringing their total to $22,250.
- 401(k): Employees may defer up to $24,500. Participants ages 50–59 or 64 and older may contribute an additional $8,000, for a total of $32,500. Participants ages 60–63 may contribute up to $35,750, including the special $11,250 catch-up contribution.
Certain SIMPLE IRA plans may qualify for higher contribution limits under SECURE 2.0. Even so, the difference in employee deferral limits is an important consideration for business owners and employees focused on maximizing retirement savings.
SIMPLE IRA Employee Eligibility
An employee generally must be eligible to participate in a SIMPLE IRA if the employee:
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Received at least $5,000 in compensation during any two preceding calendar years, whether or not those years were consecutive; and
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Is reasonably expected to receive at least $5,000 in compensation during the current calendar year.
These are the most restrictive eligibility requirements an employer may use. Employers may lower or eliminate the compensation requirements, but they generally cannot impose additional participation conditions.
An employer may choose to exclude:
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Employees covered by a collective bargaining agreement if retirement benefits were negotiated in good faith;
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Certain unionized air pilots covered under Title II of the Railway Labor Act; and
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Nonresident aliens who received no U.S.-source earned income from the employer.
Review the SIMPLE IRA eligibility requirements from the IRS.
SIMPLE IRAs Pros
The potential advantages of a Savings Incentive Match Plan for Employees (SIMPLE IRA) include:
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Relatively straightforward setup
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Fewer administrative requirements than many qualified retirement plans
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Potential tax credits for eligible employers
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Required employer contributions that may be tax-deductible
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Traditional and Roth contribution options, when supported by the plan and financial institution
SECURE 2.0 permits Roth SIMPLE IRA contributions beginning in 2023. However, availability may depend on the employer’s plan documents and chosen financial institution.
Eligible employers may also claim a federal tax credit for certain costs associated with establishing, administering and educating employees about a new SIMPLE IRA. The credit may be available for up to three years:
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Employers with 50 or fewer employees may receive a credit equal to 100% of eligible startup costs.
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Employers with 51 to 100 employees may receive a credit equal to 50% of eligible startup costs.
The annual credit is limited to the greater of:
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$500; or
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The lesser of $250 multiplied by the number of eligible non-highly compensated employees or $5,000.
A separate tax credit may also be available for qualifying employer contributions during the plan’s first five years, subject to employer-size and employee-compensation requirements.
Review the retirement-plan startup tax credits from the IRS.
SIMPLE IRAs Cons
While SIMPLE IRAs offer several advantages, employers should also consider their potential limitations:
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Employee limit: SIMPLE IRAs are generally available only to employers with 100 or fewer employees who earned at least $5,000 during the preceding calendar year. A limited two-year grace period may apply if an existing plan later exceeds this threshold.
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Lower employee contribution limits: SIMPLE IRAs generally have lower employee salary-deferral limits than 401(k) plans. This may be a disadvantage for owners and employees who want to maximize their retirement savings.
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No participant loans: Unlike some 401(k) plans, SIMPLE IRAs cannot offer participant loans. Employees must take a distribution to access the money, which may result in income taxes and an additional tax for early withdrawals.
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Mandatory employer contributions: Employers must generally provide either a matching contribution of up to 3% of compensation or a 2% nonelective contribution for eligible employees each year. This requirement applies even during years when the business experiences lower revenue, although limited flexibility is available for temporarily reducing the matching percentage.
SIMPLE IRA Advisors
Langan Financial Group's SIMPLE IRA advisors are retirement plan specialists for small businesses.
We help small businesses determine the right retirement plan for them and their employees. We have set up, managed, and transitioned numerous plans.
Whether you have a few questions about your plans, are interested in a retirement plan benchmark, or are curious about what additional value we can provide your organization and its employees, we are here to help.
Get started today
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Can Your SIMPLE IRA be Improved?
Langan Financial Group's SIMPLE IRA advisors have over 50 years of experience servicing retirement plans for organizations.
We have an experienced, highly educated team that specializes in retirement plan programs for organizations. In fact, one retirement plan advisor is a licensed attorney specializing in ERISA law, the law that governs retirement plan regulations.
While this individual does not practice law on behalf of Langan Financial Group, this perspective allows our team a deeper insight into setting up and managing retirement plans for organizations.
Give us a call at 717-288-1880 to see how our local advisors can help with your retirement plans. Or visit our retirement plan advisor contact page to fill out an inquiry.
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Financial Advisor Locations:
Camp Hill, PA Financial Planning Office
York, Pa Financial Planning Office
Harrisburg, PA Financial Planners
Communities Served:
Langan Financial Group, LLC ("Langan Financial Group" or "LFG") is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. LFG may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements.
You can review our registration and disciplinary history on the SEC's Investment Adviser Public Disclosure (IAPD) website and, for brokerage registrations, on FINRA's BrokerCheck. This website is for general information only. It is not legal, accounting, or tax advice. Please talk with your own legal or tax professional about your situation. Important information about our firm is on our Disclosures page.
© Langan Financial Group
Harrisburg, PA Office
Address: 1863 Center St, Camp Hill, Pa 17011
Phone: 717-288-1880
York, PA Office
Address: 3405 Board Rd, Suite 200, York, Pa 17406
Phone: 717-773-4085
