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Note: this page is about a Delaware SIMPLE 401(k) (Individual)
For federal SIMPLE 401(k) (Individual), or a SIMPLE 401(k) (Individual) in another state, click here.
2021
Delaware
SIMPLE 401(k) (Individual)
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2022
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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
Strategy Details
Related Resources
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 a SIMPLE 401(k) (Individual)?
Employees can use a SIMPLE 401(k) offered by their employer to invest pretax dollars and defer taxes on the deposits until retirement.
2021
Delaware SIMPLE 401(k) (Individual) 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.
There Are Thousands of Other Tax Planning Strategies Your Clients Are Missing Out On
Learn how Corvee can help you save your clients money in taxes.
Benefits
The plan is not subject to the nondiscrimination rules that apply to traditional 401(k) plans.
Contributions and gains are not subject to income taxes until distributed from the plan.
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.
Distributions from the 401(k) are treated as ordinary income and may be subject to an additional 10% penalty if taken before age 59½.
Conflicting strategies: Traditional 401(k) (Individual), Solo 401(k) (Individual), SIMPLE IRA (Individual), Roth 401(k)
Assumptions When Taking the SIMPLE 401(k) (Individual)
The employer wishes to make a 3% contribution to all eligible employees.
All employees are capped at the maximum annual compensation limit.
Requirements to Claim the SIMPLE 401(k) (Individual)
Your employer must create the SIMPLE 401(k) plan in order for you to participate.
Your employer must have 100 or fewer employees.
Your employer cannot have any other retirement plans.
Conflicting Strategies
StrategySIMPLEIRAIndividual
StrategyTraditional401kIndividual
StrategyRoth401kIndividual
StrategySolo401kIndividual
Business Entities That Can Claim the SIMPLE 401(k) (Individual)
Individual
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All State-Level 2021 SIMPLE 401(k) (Individual) Details
See the federal level strategy here.
To learn more about how a SIMPLE 401(k) (Individual) is calculated in each state, click on your state below.
States with SIMPLE 401(k) (Individual)
Arizona
Alabama
Arkansas
California
Colorado
Connecticut
District of Columbia
Delaware
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
New Jersey
New Mexico
New York
North Carolina
North Dakota
Oklahoma
Oregon
Rhode Island
South Carolina
Utah
Vermont
Virginia
West Virginia
Wisconsin
Stay tuned for more information on these states in the future.
Alaska
Florida
Nevada
New Hampshire
Ohio
Pennsylvania
South Dakota
Tennessee
Texas
Washington
Wyoming
Additional Tax Strategies You May Qualify For
Those who typically qualify for a SIMPLE 401(k) (Individual) could also save money in taxes by using the following additional tax planning strategies:
Traditional 401(k) (Individual)
Make pretax contributions to your workplace retirement account
SIMPLE IRA (Individual)
Contribute pretax earnings to a tax-favored retirement account
Roth 401(k)
A salary-deferral retirement plan funded with after-tax contributions
See All Strategies
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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