Question

To be eligible to adopt a SIMPLE 401(k), an employer may have no more than:

A) 50 employees
B) 75 employees
C) 100 employees
D) 125 employees

Answer 1

An employer can adopt a SIMPLE 401(k) plan if they have no more than 100 employees. SIMPLE 401(k) plans are part of defined contribution retirement plans which are portable, tax deferred, and allow both employer and employee contributions.

Step-by-step explanation:

To be eligible to adopt a SIMPLE 401(k) plan, an employer may have no more than 100 employees. This type of retirement plan is a defined contribution plan that is beneficial for both employers and employees. Employers can contribute a fixed amount regularly—often every paycheck—and employees can make their contributions too. These contributions are then invested in a variety of investment options and have the advantage of being tax deferred. Additionally, such plans are portable, so if an employee moves to a different job, the 401(k) can go with them. This flexibility is an improvement over the traditional pension plans and can assist with offsetting inflation costs in retirement.