SIMPLE IRAs and safe harbor 401(k)s are employer-sponsored retirement plans that allow participants to defer salary into the plan and receive either a non-elective or matching contribution from the business owner. Let’s examine how each plan type may benefit the business owner and his or her employees.
|Feature||SIMPLE IRA||Safe Harbor 401(k)|
|Eligible Employers||Any business with 100 or fewer eligible employees||Any business|
|Plan Establishment Deadline||October 1||October 1|
|Maximum Participant Eligibility Restrictions||Earning at least $5,000 in any two preceding years and the expectation to earn $5,000 in the current year||Age 21 or older with one year of service and 1,000 hours worked per year|
|Maximum Contributions for 2021||$27,000 per person ($33,000 with catch-up)
||$58,000 per person ($64,500 with catch-up)
|Distributions||Allowed at any time; however, penalties may apply if under age 59½||Allowed after triggering event; penalties may apply if under age 59½ (or age 55 when separated from service)|
|Annual 5500 Filling||No||Yes, unless the plan has less than $250,000|
*A qualified automatic contribution arrangement (QACA) for the safe harbor 401(k) may require a vesting schedule.
Stifel does not provide legal or tax advice. You should consult with your legal and tax advisors regarding your particular situation.