A "savings incentive match plan for employees," or SIMPLE, individual retirement account is for businesses that have 100 or fewer employees and no other company retirement plan in place. The employer has a required contribution that is either a matching contribution equal to a certain portion or percentage of the employee's contribution, or a minimum nonelective contribution that is made to all plan participants.
A matching contribution encourages plan participation, whereas a nonelective contribution is made whether or not an employee participant contributes to the plan. In 2012, the employee can contribute up to $11,500 annually to this plan. Plan participants ages 50 and older can also make catch-up contributions of up to $2,500 more per year.
The company doesn't have to file an annual return for the plan. Annual nondiscrimination testing is not required, and the company can use the Internal Revenue Service model form as its plan document. The contributions are invested in IRAs.