SIMPLE Retirement PlansWritten by Tony Novak
A relatively new type of retirement plan is now available to businesses with less than 100 employees. The new plan is called “SIMPLE” and it is easy addition to employee benefits for almost any small business. The Small Business Protection Act of 1996 first made this plan available and name stands for Savings Incentive Match Plan for Employees. It can be designed as either an IRA or a 401(k) plan and is much less expensive for an employer than other types of plans. . Here are key provisions: 1.Employees can contribute any amount up to $6,500 of pay. 2.One-person businesses are eligible. 3.Part-time and hobby businesses are eligible. 4.The money can go into any type of self-directed accounts titled as IRAs or 401(k) accounts for each participant. This includes stocks, mutual funds, banks, annuities, etc. 5.All accounts are 100% vested immediately. This means that all of money belongs to employee; employer cannot touch it under any circumstances. 6.Employers may contribute in any of following three ways: a) Match each employee’s voluntary contribution dollar for dollar up to first 3% of employee’s pay. No employer contribution is required if employee does not voluntarily contribute. b)Match 1% of pay in 2 out of 5 years after notifying employees (if using an IRA account). c)Contribute 2% of pay for each employee, regardless of whether employee makes voluntary contributions or not. 7.Normal retirement distributions will be handled in a manner similar to current IRA rules. 8.Premature distributions during first two years of participation in plan will be taxed at 25% instead of usual 10% tax penalty. 9.This plan cannot be combined with any other employer sponsored retirement plan. 10.Any form of business entity or non-profit organization may establish a SIMPLE plan, except state and local governments. 11.Plans can be established at any time of year before October 1. Plans may not be started in October, November or December. 12.Administration requirements are minimal, averaging about one hour per employee.
| | Understanding COBRA Health CoverageWritten by Tony Novak
As more people face job cuts in this slowing economy, issue of COBRA medical insurance becomes more important. This is a very brief review of a few of most important points if you are suddenly faced with need to pay for your own medical coverage.The acronym “COBRA” was brought about by a tax law change that required employers with more than 25 employees to offer temporary health insurance in event of lay-offs and other circumstances that interrupt coverage under employee benefit plans. It simply means that an ex-employee pays former employer in order to continue to stay on company’s medical insurance plan. You must make this election within 30 days of your job termination by delivering appropriate payment for your insurance to employer. COBRA ensures that you will have access to continued coverage, but usually at a higher price than other types of medical insurance. COBRA is meant only as a temporary solution, not as a permanent medical plan. And, depending on specific insurance plan, COBRA coverage may not be effective if you move to another residence away from insurance plan's coverage area. SMALL BUSINESSES are exempt from COBRA, meaning that they do not offer option of medical benefits to an ex-employee. Some companies continue to offer ex-employees medical benefits by simply not informing insurance company of termination. Be careful, this can backfire. Most small group medical pans do not allow coverage for ex-employees.
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