Low Cost Retirement Plan for Non-Profits
Easy to set up and maintain retirement plan with minimal requirements
Non-Profit SIMPLE IRA Plans
A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a low-maintenance retirement plan. Because of its design, it is exempt from much of the testing associated with other retirement plans.
A SIMPLE IRA works well in small organizations that want to provide employees with a pre-tax retirement program that mandates employer contributions.
Why a SIMPLE IRA Could Be The Perfect Retirement Plan for Non-Profits
When looking at retirement plans for nonprofits, SIMPLE IRA plans are one of the best options.
Non-profits are expected to fully accomplish their mission while operating on a shoestring budget. It is not uncommon for employees to wear multiple hats, take on multiple responsibilities, and be stretched thin.
Because of these common issues, a SIMPLE IRA plan is perfect for non-profits. SIMPLE IRA plans are:
- Easy to set up
- Easy to administer
- Have minimal costs
The majority of the work is outsourced to the financial advisor and their team. So, the non-profit can help provide individual retirement saving opportunities for their employees.
This helps the organization stay competitive in the market while not having to add additional work and fees to their organization as compared to other retirement plans.
How Does a SIMPLE IRA Work?
In order for a non-profit company to use a SIMPLE IRA, it must have less than 100 employees.
The IRS does not categorize SIMPLE IRA plans as qualified plans. Since it was designed for start-ups and small organizations, a non-profit would not have to worry about:
- Non-discrimination testing
- Top-heavy testing
- Vesting schedules
- Tax reporting
This plan allows employees to put tax-deferred money aside to save for retirement.
3 Easy Steps to Set Up a SIMPLE IRA
Forming a SIMPLE IRA plan can likely be completed in an afternoon through these three steps:
1. Execute a Written Agreement
This means filling out an IRS Form 5304-SIMPLE or 5305-SIMPLE which defines the rules of the plan. Once this is filled out, it must be kept on file. It does not need to be filed with the IRS.
2. Set up a SIMPLE IRA account for every employee
Using the providers' platform, the plan sponsor will create accounts for each employee.
3. Provide notice to every eligible employee
The signed Form 5304-SIMPLE or 5305-SIMPLE must be distributed to the eligible employees when they join the plan and each year afterward.
Once these steps are completed, the plan has been set up and both parties can begin making contributions.
2023 SIMPLE IRA Contribution Limits
When employees join the SIMPLE IRA, they are automatically vested in the plan. This means from the time contributions start, the employee has full ownership of the invested funds and can deposit and withdraw at any time.
In 2023 there is an employee contribution limit of $15,500. If a participant is over the age of 50, they can contribute an additional $3,500, making the total $19,000 for 2023. It is important to note that this is less than a 401(k), but more than a traditional IRA would allow for.
SIMPLE Plans only allow pre-tax contributions, which means that this plan can only be used like a traditional IRA. The participant will not be able to contribute after-tax dollars like they could in a Roth IRA.
Since employer contributions are mandated, there are a couple of options on how the employer chooses to do this. An employer may choose between a contribution to the employee or a matching contribution:
- Pay the eligible employee between 2 percent of their earnings each year
- Match 100 percent of their contributions, up to 3 percent of their salary
With the first option, a contribution will be made to the employee regardless of if they make their own contributions. With the second option, the employee must make a contribution to receive any amount matched.
There are limited situations where these contributions can be reduced, but it is important to meet with a specialist to determine eligibility.
SIMPLE IRA Costs
When setting up a SIMPLE IRA, there are little to no administration costs, unlike a 401(k) or 403(b) plan.
Some recordkeepers will charge an annual fee for having the account and most will generally charge an investment fee as a percentage of total assets.
The investment fee is dependent on which fund the assets are held in, as it is different for each fund. The cost to the employer will be the mandated employer contributions. dfsgsdgf
SIMPLE IRA Restrictions
Participants do not have the option for loans in a SIMPLE IRA.
The only way to access funds before retirement age is to withdraw them.
Unfortunately, doing so is met with a 25% penalty, which is notably higher than the 10% penalty for a traditional IRA.
Chat with a SIMPLE IRA Advisor
Langan Financial Group's SIMPLE IRA advisors have over 100 years of experience servicing 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.
FREE Benchmark Comparison Services
Financial Advisor Locations:
Camp Hill, PA Financial Planning Office
York, Pa Financial Planning Office
Harrisburg, PA Financial Planners
Communities Served:
Disclosure: Check the background of your financial professional on FINRA's BrokerCheck. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Cambridge and Langan Financial Group, LLC. are not affiliated. Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC, to residents of: AL, AZ, CO, DE, FL, GA, IA, KY, MD, NJ, NM, NY, NC, OH, PA, TX, VA, WI Cambridge and Langan Financial Group does not offer legal advice. Estate planning services are in regards to your overall financial plan. Always be sure to speak to a legal professional in regards to specific legal matters. Fixed insurance services offered through Langan Financial Group.
Testimonial/Endorsement Disclosure: The testimonials may not be representative of the experience of other customers. The testimonials are no guarantee of future performance or success. All of the testimonials/endorsements are clients with the exception of Steven Martinez of York SPCA. There was no cash nor non-cash compensation for any of the testimonials provided.
© 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
