SIMPLE IRA setup

My wife is trying to set up a retirement plan (9/4/208). She had an employee (employee started as a regular paid in 12/05) and employees some of the kids (under 5k a year).

she wants to set up a retirement plan and is looking into setting up a simple (in order to avoid the mandatory match for SEP).

I get the impression that the kids can be excluded, but is the now- terminated employee eligible? If so, what is the means of notification?

Any thoughts on (requiring use of the same inancial institute that the wife will be using) vs (having the employee pick their own)? How do I match if the former employee makes contributions on their own (since we no longer pay them). If former employee contributes on their own, how does wife found out about it?

thanks!

Reply to
zigipha
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Retirement plans are offered to employees. A former employee is by definition not an employee. Should your wife set up the plan and higher an employee who makes at least $5K per annum, then that employee can elect to contribute to the plan. If the employee elects to contribute, then your wife as the employer would have to make matching contributions of 3% of compensation OR nonelective contributions of 2%. A nonelective contribution means that your wife makes the 2% contribution even if the employee elects not to contribute to the plan. There is a rule that allows a match of less than 3% (minimum of 1%) for any two years out of a five year period.

See IRS Pub 560 for more details on what retirement options are available to the self-employed who have or do not have employees.

Reply to
Alan

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