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Finance Dictionary and Glossary of Investment Terms
SIMPLE 401(k) Plan
A retirement plan sponsored by employers which is attractive for employers because it avoids some of the administrative fees and paperwork of plans such as 401(k)s. Employers benefit from the tax-deductible contributions made to the plan, and employees may elect to have salary deferrals in order to contribute to the plan. The employer has the option of matching a certain portion of the employee's deferrals or making non-elective contributions to all eligible employees (an annual limit applies in both cases). A minimum compensation eligibility requirement exists for employees who want to join this plan, and employees cannot establish any other qualified retirement plans at the same time.