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U.S. Connecticut SIMPLE 401(k) (Business)
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Note: this page is about the Connecticut SIMPLE 401(k) (Business)
For federal SIMPLE 401(k) (Business), or the SIMPLE 401(k) (Business) in another state, click here.
2021 Connecticut SIMPLE 401(k) (Business)
Choose an applicable year 2022 | 2021
Overview
A simplified employer-sponsored retirement plan that allows small businesses and employees to contribute pre-tax dollars to reduce taxable income.
Conformity Type: Rolling Conformity - Automatically update when federal IRC codes change
Commonly referred to as SIMPLE 401(k) plan and SIMPLE employer-sponsored retirement plan
Overview
A simplified employer-sponsored retirement plan that allows small businesses and employees to contribute pre-tax dollars to reduce taxable income.
Conformity Type: Rolling Conformity - Automatically update when federal IRC codes change
Commonly referred to as SIMPLE 401(k) plan and SIMPLE employer-sponsored retirement plan
Do I Qualify for the SIMPLE 401(k) (Business)?
SIMPLE 401(k) plans allow businesses with fewer than 100 employees to offer a salary-deferral retirement plan to employees without some of the administrative complexities of a traditional 401(k) plan.
2021 Connecticut SIMPLE 401(k) (Business) Details
SIMPLE 401(k) is a subset of the 401k(k) plan. These plans are only for businesses with fewer than 100 employees. SIMPLE plans offer many of the same features and benefits of the more common 401(k) plans. The plan allows employees to contribute pre-tax dollars from their compensation, matching contributions from the business, and non-elective contributions by the business. SIMPLE plans are also not subject to non-discrimination rules, which lowers plan costs for business owners. Plans can also have a variety of investment options. Many states honor after-tax contributions to SIMPLE 401(k) plans, creating additional tax savings benefits at the state level during retirement. SIMPLE plans have other rules that employers (aka; plan sponsors) should know when considering these plans. Employers must make either: 1. A matching contribution up to 3% of employee compensation, or 2. A non-elective contribution of 2% of each employee's compensation Other differences between SIMPLE plans and other business retirement plans include the following: - All employees are immediately vested in any contributions to the plan - No other retirement plans can be offered by the business - If a business exceeds 100 employees, it has 2 years to change its retirement plan to be compliant Contributions limits do apply, but with the Corvee tax planning software, you can see what tax savings you can accomplish based on your specific contribution goals.
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Benefits
  • The plan is not subject to the nondiscrimination rules that apply to traditional 401(k) plans.
  • Employees are fully vested in all contributions.
  • A straightforward benefit formula allows for easy administration.
  • Optional participant loans and hardship withdrawals add flexibility for employees.
Considerations
  • No other retirement plans can be maintained.
  • Withdrawal and loan flexibility adds administrative burden for the employer.
  • The employer must file a Form 5500 annually.
  • Employer contributions of 1%–3% of compensation per employee are required.
  • Conflicting strategies: Traditional 401(k) for Businesses, Solo 401(k) for Businesses, Simplified Employee Pension (SEP), Defined Benefit Plan, Cash Balance Plan, Section 412(e)(3) Plan
Assumptions When Taking the SIMPLE 401(k) (Business)
  • The employer wishes to make a 3% contribution to all eligible employees.
  • All employees are capped at the maximum annual compensation limit.
  • All employees make contributions to the SIMPLE plan.
Requirements to Claim the SIMPLE 401(k) (Business)
  • The business may not exceed 100 employees who earned $5,000 or more during the previous calendar year.
  • The business cannot currently have any other retirement plans.
  • The employer must notify each employee of the following information before the beginning of the election period (generally, the 60-day period before January 1, with some exceptions).
  • Employers are required to contribute each year either a matching contribution between 1% and 3% of compensation (without limitation) for employees who contribute to their own accounts, or a nonelective contribution of 2% of salary for each eligible employee, regardless of whether the employee contributes. The 2% contribution requirement is capped at a set compensation amount, adjusted annually for inflation.
Conflicting Strategies
  • StrategyTraditional401kBusiness
  • StrategySIMPLEIRABusiness
  • StrategySolo401kBusiness
  • StrategySimplifiedEmployeePensionBusiness
  • StrategyCashBalancePlanBusiness
  • StrategySection412E3PlanBusiness
Business Entities That Can Claim the SIMPLE 401(k) (Business)
  • Schedule C
  • Schedule F
  • S Corporation
  • C Corporation
  • Partnership
All State-Level 2021 SIMPLE 401(k) (Business) Details
Additional Tax Strategies You May Qualify For
The material discussed on this page is meant for general illustration and/or informational purposes only and is not to be construed as investment, tax, or legal advice. You must exercise your own independent professional judgment, recognizing that advice should not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. Further, any advice you provide in connection with tax return preparation must comply in full with the requirements of IRS Circular 230.

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