What is a SIMPLE IRA plan?
A SIMPLE IRA plan is an IRA-based plan that gives small employers a simplified method to make contributions toward their employees’ retirement and their own retirement. Under a SIMPLE IRA plan, employees may choose to make salary reduction contributions and the employer makes matching or nonelective contributions. All contributions are made directly to an Individual Retirement Account or Individual Retirement Annuity (IRA) set up for each employee (a SIMPLE IRA). SIMPLE IRA plans are maintained on a calendar-year basis. See IRS Publication 560, IRS Publication 590 and IRS Notice 98-4 for detailed information on SIMPLE IRA plans.
Simple IRA contribution limits
| Year | Maximum Regular IRA Contribution | Catch-up Contribution |
| 2002 | $7000 | $500 |
| 2003 | $8000 | $1000 |
| 2004 | $9000 | $1500 |
| 2005 | $10000 | $2000 |
| 2006 | $10000 plus cost-of-living adjustments (COLA) increases | $2500 |
| 2007 | $2500 plus COLA increases |
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