It’s National Waffle Week – and what’s more flexible than a waffle? OK, maybe technically a lot of things. But think about it – waffles are paired with chicken, used as an awesome vehicle for breakfast sandwiches, and taste delicious with a plethora of fruits, syrups, and of course, whip cream.
Craving waffles yet? How about wishing for the flexibility and versatility of waffles in other areas of your life? Maybe your retirement plan? If you have a SIMPLE IRA and you’re waffling over important retirement plan decisions, like upgrading to a 401(k), we can help!
SIMPLE IRA upgrade? Important points to consider
Below are the important aspects to consider when it comes to deciding to make the switch.
- Company size – SIMPLE IRAs are limited to 100 or fewer employees. Thus, if an employer has over 100 employees, a 401(k) plan, which does not have this limitation, is a butter fit.
- Employer contributions – SIMPLE IRAs require mandatory employer contributions, while 401(k) plans may not. SIMPLE IRAs require a match up to 3% OR a non-elective contribution of 2% for all eligible employees. This applies regardless of their election to defer into the plan. While 401(k) plans do not have this requirement, they must pass nondiscrimination testing, and SIMPLE IRAs do not.
- Vesting – SIMPLE IRAs require immediate vesting, but 401(k) plans allow the employer to determine which vesting schedule is batter for them.
- Contribution limits – SIMPLE IRAs have lower contribution limits than 401(k) plans. For employees, in 2023, the SIMPLE limit is $15,500 ($19,000 for those 50 or older). For employees in 2023, the 401(k) limit is $22,500 ($30,000 for those 50 or older). That can add up waffley fast.
- Flexibility – In addition to the flexibility mentioned above, 401(k) plans allow for a Roth option and loans. However, SIMPLE IRAs do not. 401(k) plans may be paired with other plan types, such as defined benefit or cash balance plans, as well.
While SIMPLE IRAs are aptly named for their simplicity in administration and set up, 401(k) plans allow for broader options and flexibility, which may be necessary or desired by employers. This makes a SIMPLE IRA upgrade to a 401(k) a potentially great choice.
Want to know more? We can help.
If making the decision to upgrade from a SIMPLE to a 401(k) plan alone sounds waffle, have no fear. We’re here to help. Fill out the form below and we’ll send you more resources and answer any questions you may have about this transition.