Retirement Planning | VII. SIMPLE, 403B, and 457 Plans


SIMPLE (Savings Incentive Match Plans for Employees) are retirement plans for small employers. These plans provide an incentive to small employers to adopt retirement plans because they are easy to create and maintain compared to other plans. A SIMPLE allows employees to make elective deferral contributions while requiring employers to match these contributions or make non-elective contributions.

The different types of SIMPLE plans are: SIMPLE IRA and SIMPLE 401k

The SIMPLE IRA makes the employer either match contributions or provide nonelective contributions. SIMPLE IRA plans are permitted for tax-exempt employers and governmental entities, and must be the only plan that receives contributions (no other type of IRAs).

The SIMPLE 401k is a CODA (Cash or Deferred Arrangement) that must satisfy contribution requirements, exclusive plan requirements, and vesting requirements. These plans must be maintained on a calendar year basis and not on a fiscal year basis. There is a 100 employee limit on this plan.

403(b) Plans

403(b) plans are also called "Tax Sheltered Annuities" (TSAs) or "Tax-Deferred Annuities" (TDAs). These type of plans are available to certain non-profit organizations and to employees of public educational systems.

457 Plans

457 Plans allow certain employees of state and local governments and of nongovernmental tax-exempt entities the ability to defer compensation free from current income taxation.

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