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If you are concerned about the complexities of administering a qualified retirement plan for your small business, there is a relatively “simple” alternative to consider: the Savings Incentive Match Plan for Employees—aptly called the SIMPLE, for short. SIMPLEs have been around for almost 15 years, but are not as well known as 401(k) plans.

A SIMPLE plan can be set up effective on any date between January 1 and October 1, provided the plan sponsor did not previously maintain a SIMPLE plan. If a SIMPLE plan was previously established, a SIMPLE plan may be set up effective only on January 1.

Basic premise: SIMPLE plans are not subject to many of the tough reporting rules and strict nondiscrimination requirements that apply to other qualified retirement plans. But a SIMPLE is only available to employers with 100 or fewer employees. For purposes of this rule, you must count all employees who earned at least $5,000 in the previous year.

Any employee who has been paid at least $5,000 in compensation for any two previous years and expects to receive at least that amount in the current year is eligible to participate. Self-employed individuals may also participate in a SIMPLE plan that they set up for themselves.

As with most other qualified retirement plans, the contributions are adjusted annually for inflation. For 2011, eligible employees can elect to contribute up to $11,500 of salary to the plan. Plus, if you are age 50 or older, you can defer an extra $2,500 as a catch-up contribution.

Employers may also provide “matching” contributions. Generally, the employer may provide elective contributions of up to 3% of compensation (but not less than 1% in no more than two out of five years) or nonelective contributions of 2% of each eligible employee’s compensation (based on a maximum compensation of $245,000 for 2011). These contributions are deductible by the employer.

Like other qualified plan distributions, distributions from a SIMPLE are taxed at ordinary income rates when withdrawn. Furthermore, a 25% penalty applies to distributions within the first two years of participation in the plan. Otherwise, the usual 10% tax penalty for early withdrawals made prior to age 59½ applies.

The SIMPLE is a viable option for small-business owners. Alternatively, you might use a Simplified Employee Pension (SEP), which also emphasizes ease of administration. Consult a benefits specialist for more details.