Who is Eligible
You can set up a SIMPLE IRA if you have 100 or fewer employees who received $5,000 or more in compensation from the previous year. Each employee that meets these guidelines would have their own separate SIMPLE IRA, held by a financial institution such as Trust, a bank or insurance company. You can also use less restricted eligibility requirements by reducing or eliminating compensation requirements, but you cannot impose any other conditions for participating. Compensation for employees is the total wages required to be reported on Form W-2. Employees must be notified before the beginning of an election period to make salary reduction choices and whether you have matching contributions. In addition, they should receive a description of the financial institution and written notice that their balance can be transferred if you use an eligible financial institution, such as Trust Administration Services. Employees that are not eligible include those that are covered by a union agreement or are nonresident alien employees who have received no U.S. source wages, salaries or personal compensation from you.

Contribution
Eligible employees may defer 100% of compensatio n up to the annual dollar limit ($10,500 in 2007). I f the employee is age 50 or over, a “catch-up” contribution is also allowed. This additional catch-up contribution amount for 2007 is $2,500. Each year (during the election period) the employee must decide how much they wish to defer. The election period for the employee is normally the 60 day-period immediately preceding January 1 of a calendar year. Employee contributions are deducted from employees’ salaries and must be deposited to each employee's SIMPLE IRA by the 30th day following the month for which the deferral applies.

Distribution Requirements
Distributions are subject to IRA rules and would generally be included in income for the year it was received. Tax-free rollovers can occur from one SIMPLE IRA to another SIMPLE IRA. They can also be rolled into a non-SIMPLE IRA only after a two-year participation requirement has been met. There are early withdrawal penalties. See IRS Publication 590 for more information

Tax Treatment of Distributions
Distributions from a SIMPLE IRA are generally subject to income tax for the year in which they are received. If a participant takes a withdrawal from a SIMPLE IRA before age 59 1/2, generally a 10 percent additional tax applies unless the following circumstances prevail:

Note : If such withdrawal occurs within two years of beginning participation, the 10 percent tax noted above is increased to 25 percent.

SIMPLE IRA contributions and earnings may be rolled over tax-free from one SIMPLE IRA to another. A tax-free rollover may also be made from a SIMPLE IRA to another type of IRA, or to another employer’s qualified plan, after two years of beginning participation in the original plan.

A specific minimum amount of SIMPLE IRA contributions and earnings is required to be distributed by April 1 of the year following the year the participant reaches age 70 1/2. After this initial year, the participant must receive a required minimum distribution for each year by December 31 of that year. (For further details regarding the required minimum distribution amount, see IRS Publication 590.)