Question

SIMPLE IRAs must use 3 year cliff or 2-6 graduated vesting.

a.) True
b.) False

Answer 1

SIMPLE IRAs can use either the 3-year cliff vesting or the 2-6 graduated vesting schedule. Hence, a) True.

Step-by-step explanation:

SIMPLE IRAs can use either the 3-year cliff vesting or the 2-6 graduated vesting schedule. The cliff vesting schedule means that employees become fully vested in their SIMPLE IRA contributions after a fixed period of three years.

For example, if an employee leaves their job before the three-year mark, they would forfeit all the employer contributions made to their retirement account.

On the other hand, the graduated vesting schedule allows employees to become vested in their contributions over a period of time, typically six years. This means that employees become increasingly vested in their contributions each year until they reach 100% vesting after the six years.