Companies moving from a SIMPLE IRA to a 401(k) plan are usually seeking some additional flexibility and have outgrown their current SIMPLE plan. The questions arise: What is a SIMPLE retirement plan? And how is it different from a 401(k)?
SIMPLE is an acronym for a Savings Incentive Match Plan for Employees. There two SIMPLE plans, SIMPLE IRA and SIMPLE 401(k). Both are tax-deferred retirement plans provided by employers. The goal of a SIMPLE plan is similar to other retirement plans: to allow employees a simple way to save and invest money for retirement. We’ve outlined a few of the basics of SIMPLE and traditional 401(k) plans to highlight some important similarities and differences.