The Small Business Owner's Guide to the SIMPLE IRA

You want to offer your team a retirement plan. You do not want a second job running it.

If you have 100 or fewer employees, the SIMPLE IRA was built for exactly that. It gives your team a real, tax-advantaged way to save, and gives you a plan that mostly runs itself. This guide covers what it is, what it costs, how the match works, and how to get started.

What is a SIMPLE IRA?

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a retirement plan for small businesses with 100 or fewer employees. Employees save from their paychecks before taxes, and the employer adds a contribution on top.

Think of it as the core of a 401(k) without the machinery built for much larger companies. Your team gets the benefits they care about: tax savings, an employer contribution, and an account that is theirs to keep. You skip the testing, the heavy filings, and the hired administrator.

What does a SIMPLE IRA cost a small business?

On WealthRabbit, a SIMPLE IRA costs $29 a month plus $4 per employee. Here is what that looks like over a year:

There is also what you do not pay for. No Form 5500 filing, no annual nondiscrimination testing, and no third-party administrator. Contributions run through payroll, so the plan largely takes care of itself.

How does the employer match work?

You choose one of two ways to contribute. Here is how they compare:

A real example. Say you have 10 employees who each earn $50,000.

• Match at 3%: If everyone contributes at least 3%, you contribute $1,500 per person, or $15,000 total. If only half participate, you pay about $7,500.
• 2% contribution: You contribute $1,000 per person, or $10,000 total, no matter who participates.

Both options deliver what employees care about most: an employer contribution to their retirement, at a cost you can plan around. Your contributions are also tax deductible.

How much can employees contribute?

Employees can contribute up to $17,000 in 2026, with a higher catch-up limit for anyone 50 or older. That is lower than a 401(k)'s limit, but most small teams never get close to either one. Under SECURE 2.0, employers can also allow Roth contributions to a SIMPLE IRA.

What tax credits help pay for it?

Under SECURE 2.0, starting a plan can earn up to $16,500 in federal tax credits over three years. Two credits do most of the work:

1. Startup credit: Employers with up to 50 employees can generally claim 100% of eligible setup and administration costs, up to $5,000 a year for the first three years. Employers with 51 to 100 employees can generally claim 50%.
2. Employer contribution credit: Smaller employers can also claim a credit of up to $1,000 per employee on their contributions. It phases down for employers with 51 to 100 employees.

For many small businesses, these credits offset much of the early cost of offering the plan. You claim them on Form 8881, and your tax professional can confirm what you qualify for.

Who qualifies for a SIMPLE IRA?

Your business qualifies if:

1. You had 100 or fewer employees who earned $5,000 or more in the prior year.
2. You do not offer another retirement plan at the same time.

Your employees are generally eligible if they earned at least $5,000 in any two prior years and expect to earn $5,000 this year. You can choose to be more generous than that, but not stricter.

If you grow past 100 employees, you generally get a two-year grace period before you need to move to a 401(k).

How do you set up a SIMPLE IRA?

Setup takes about 10 minutes online. Three steps:

1. Confirm you qualify. You have 100 or fewer employees who earned $5,000 or more, and no other retirement plan.
2. Choose your contribution. Pick the match or the 2% contribution.
3. Set up and notify your team. WealthRabbit walks you through the setup, handles the plan, the platform, and the investments, and guides your employees through enrolling.

When a SIMPLE IRA may not be the right fit

A good guide tells you when to look elsewhere. A SIMPLE IRA may not be your best match if:

• You want to contribute more. Owners and key employees who want to save well beyond the SIMPLE IRA limit may prefer a 401(k).
• You want features like loans or profit sharing. SIMPLE IRAs keep things simple on purpose.
• You already sponsor another plan. A SIMPLE IRA generally has to be your only plan.
• You expect to pass 100 employees soon. You can stay in the plan for a while, but you will eventually need to switch.

The bottom line

A retirement plan should make your business stronger, not add a second job to your week. A SIMPLE IRA gets you a real plan, a real employer contribution, and real tax savings, for the cost of a few minutes and a small monthly fee.

If a plan has been on your list but felt like too much, this is your cue. You get to give your team something that lasts, and you get to do it without the headache.

About the Author

Jason Ackerman, CPA, CFP®

Co-Founder & CEO at WealthRabbit

Jason Ackerman is a CPA, CFP®, and CGMA, and Co-Managing Partner at BNA CPAs & Advisors, where he has helped grow the firm several times over. He brings that same growth mindset, and a healthy skepticism of unnecessary complexity, to his work as Co-Founder of WealthRabbit. That combination of hands-on CPA experience and fintech innovation shapes the WealthRabbit blog's plan-comparison guides, so business owners can make a decision without needing a CPA in the room.