Definition
A retirement plan for small employers that lets employees defer salary into their own account with minimal paperwork. Employers must contribute, typically by matching employee contributions up to a small percentage of pay (commonly 3%) or making a flat contribution for everyone.
Why it matters
At small companies with no 401(k), the SIMPLE IRA is often the only workplace plan on offer, and the required employer money is free return. Deferral limits sit between IRA and 401(k) levels, so it meaningfully expands tax-advantaged space.
Example
An employee earning $50,000 at a 12-person firm contributes 3% of pay, $1,500 for the year, and the employer matches it dollar for dollar. That is $3,000 a year growing tax-deferred, half of it money the employee would not otherwise have.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.