In order to have a SIMPLE IRA plan, you must be a small business - generally, you must have 100 or fewer employees.  However, there is a 2-year grace period for growing employers to still be considered a small business even if they go over the 100-employee limit.  If you do opt for a SIMPLE IRA plan, your employees can elect to defer part of their salary.  Each employee is immediately 100% vested in (or “owns”) all contributions to his or her SIMPLE IRA.   With a SIMPLE IRA plan, you: Make either a contribution matching your employees’ contributions dollar-for-dollar up to 3% of pay or a 2% non-elective contribution for each eligible employee. (Under the “non-elective” contribution formula, even if an eligible employee doesn’t contribute to his or her SIMPLE IRA, that employee must still receive an employer contribution to his or her SIMPLE IRA equal to 2% of his or her salary.) Cannot have any other retirement plan. Need to complete just a form or two.   Pros and Cons: Easy and inexpensive to set up and operate. Good plan if you want employees to help share responsibility for their retirement. No discrimination testing required. Inflexible contributions. Lower contribution limits than some other retirement plans.   Who Contributes: Employer must contribute and employee may contribute.   Automatic Enrollment: A plan feature that allows an employer to automatically deduct a fixed percentage or amount from an employee’s wages and contribute that amount to the retirement plan unless the employee has affirmatively chosen to contribute nothing or a different amount. These automatic enrollment contributions qualify as elective deferrals.   Contribution Limits: Employee - $11,500 in 2009 and $11,500 in 2010.  If the employee is age 50 or over, a “catch-up” contribution is also allowed. This additional catch-up contribution amount is: 2009 and 2010 - $2,500. Employer - Generally, a dollar-for-dollar match up to 3% of pay or a 2% nonelective contribution for each eligible employee.       Minimum Initial Investment $1000   Filing Requirements:  An employer generally has no filing requirements. The annual reporting required for qualified plans (Form 5500 series) is not required for SIMPLE IRA plans.  The financial institution that holds the SIMPLE IRAs for the plan handles most of the other paperwork.   Participant Loans: Not permitted.   In-Service Withdrawals: Permitted, but withdrawals are included in income and are subject to a 10% additional tax if the participant is under age 59-1/2.  Also, if withdrawals are made within the first two years of participation, the 10% additional tax is increased to 25%.