Question

Which of the following is true about SIMPLE IRAs?

1.) They are easy to set up and maintain.
2.) Employees are allowed to make elective deferrals.
3.) The employer is required to match up to 3% of compensation or to make a 2% nonelective contribution for each eligible employee.

a.) 1 only
b.) 1 and 2 only
c.) 2 and 3 only
d.) 1, 2, and 3

Answer 1

The answer is d.) 1, 2, and 3. All three statements are true about SIMPLE IRAs.

Step-by-step explanation:

The answer is d.) 1, 2, and 3. All three statements are true about SIMPLE IRAs.

1. They are easy to set up and maintain: SIMPLE IRAs, or Savings Incentive Match Plans for Employees, are relatively easy to establish and maintain compared to other retirement plans.
2. Employees are allowed to make elective deferrals: Under a SIMPLE IRA plan, employees can make salary reduction contributions.
3. The employer is required to match up to 3% or make a 2% nonelective contribution: Employers are obligated to either match the employee's contribution up to 3% of their compensation or make a 2% nonelective contribution for each eligible employee.