How you can save and receive your employer matching contributions

You decide how much of your pay, up to IRS limits, you want to contribute. Your contributions will be deducted directly from your paycheck. You can make:

Employee Before-tax contributions

Because you’re contributing money from your paycheck before income taxes are deducted, you reduce your annual taxable income in the year the contributions are made. Before-tax contributions allow your savings to accumulate tax-deferred. In other words, you don’t pay taxes on what you save or on your assets as they grow until you take the money out at retirement.  Employee additional catch-up contributions. If you’re 50 or older, you can contribute an additional amount before taxes.

Employer matching contributions

Your employer may match any contributions you make, dollar for dollar, up to 3% of eligible compensation.

Examples:

• If you defer 1% of your paycheck to save in your Promise Prep SIMPLE IRA Retirement Account, your employer will match a contribution of 1% as well.

• If you defer 2%, your employer will make a matching contribution of 2%.

• If you defer 3%, your employer will make a matching contribution of 3%.

• If you defer 4% or more, your employer will only make the maximum matching contribution of 3%.

Frequently Asked Questions

• How do I participate in the Promise Prep SIMPLE IRA Retirement Plan?

  • Your employer will give you the proper form to fill out and materials to explain the details of the SIMPLE IRA plan the company has chosen. Just complete the form and return them to your employer.  Once your employer has input your information

• Vesting Schedule and Who controls my SIMPLE IRA account?

  • You control your Retirement Account. Your employer may direct SIMPLE contributions to your SIMPLE IRA account, but these contributions become your property when they are deposited in your SIMPLE IRA. The contributions are immediately 100% vested. The money must stay in a SIMPLE IRA account for two years from your initial SIMPLE IRA participation date or a 25% penalty may be assessed upon withdrawal. After two years, the normal IRA distribution rules apply (i.e., if you withdraw before you reach age 59½, you may incur a 10% penalty).

• What if I do not want a SIMPLE IRA account?

  • Employees are under no obligation to contribute through salary deduction if they do not want to do so.  If the employee does not contribute to their account, then the employer will not make a matching contribution. 

• May I participate in a SIMPLE IRA if I am in another retirement plan sponsored by another employer?

  • Yes. If you work for more than one employer, you may also participate in another retirement plan in addition to the SIMPLE IRA, but certain contribution limits among the plans may be applicable.

• Are all employees eligible to participate in a SIMPLE IRA plan?

  • Generally, yes.  Refer to information from your employer, such as your copy of the SIMPLE IRA plan document, for the rules specific to your plan.

• Cost per participant

  • A one-time $25 setup fee and ongoing $25 annual fee is taken by American Funds directly from the employee’s account and will noted on the employee’s quarterly statement.  Investments selected by the employee will have an expense ratio as well that includes an advisory fee. More information is available per your American Funds SIMPLE IRA Account.