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Retirement Topics - Who Can Participate in a SIMPLE IRA Plan?

SIMPLE IRA Plan

An employee (including a self-employed individual who received earned income) who:

  • earned at least $5,000 in compensation during any 2 years before the current calendar year and
  • expects to receive at least $5,000 during the current calendar year.

An employer can use less restrictive eligibility requirements (but not more restrictive ones) by eliminating or reducing the prior and/or current year compensation amounts. Employers cannot impose any other conditions for participating in a SIMPLE IRA plan.

Example: Employer A allows participation for employees who received at least $3,000 in compensation during any preceding calendar year.

An employer can exclude the following employees from a SIMPLE IRA plan:

  • Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and the employer
  • Nonresident alien employees who do not have U.S. wages, salaries or other personal services compensation from the employer

Additional Resources:

Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)
Publication 4334, SIMPLE IRA Plans for Small Businesses
Publication 4284, SIMPLE IRA Plan Checklist
FAQs regarding SIMPLE IRA Plans

Page Last Reviewed or Updated: 31-Jan-2014