A retirement plan for small businesses that allows an employee and the employer to contribute to a traditional IRA set up for the employee. Employees may choose to make salary reduction contributions. The employer must make either matching or nonelective contributions. Taxation is deferred until distribution. SIMPLE IRAs are typically used as a start-up plan for small employers that do not sponsor a retirement plan.

For more information, see Practice Note, Savings Incentive Match Plan for Employees Individual Retirement Accounts (SIMPLE IRAs).