This is an acronym for Savings Incentive Match Plan for Employees retirement plan. It is the common name for a tax-deferred retirement savings account that is usually provided by the employers.
This IRA was designed to serve as an incentive for smaller employers say 100 or less, to provide retirement plans for their workers while at the same time avoiding the rigors process associated with larger benefits retirement packages. A major benefit of this IRA is that they do not fall under the guidelines stated by the ERISA.
Employers that operates this retirement savings package are obligated to provide a certain minimum contribution to their employees’ accounts. Employees that sign up for this package are basically opening up their own traditional IRAs through their employer.
However, one major disadvantage is that contribution limits are lower when compared with other plans ($12,000 as at 2014). Additionally, SIMPLE IRA retirement plan rollovers more difficult, the plan requires a long waiting period before it can be activated.
A 401(k) retirement plan as we probably know it today was not a conscious construct of the United States government or the Internal Revenue Service as the case maybe but rather an innovation of Ted Benna, a renowned benefits consultant.
The 401(k) plan is named after the section 401(k) of the Internal Revenue Code which was included in 1978. Ted Benna understood that section 401(k) of the Internal Revenue Code can be used to construct a simple employee retirement plans with tax advantages.
Today, about 95% of employers include a 401(k) package in their benefits plan. A 401(k) retirement plan is a defined contribution plan, as such it is primarily funded through the pre-tax paycheck deductions of the employee. The major benefit of this plan is that there is the possibility of employer match programs, under this program an investor receives free contributions and is privileged to exceed the standard contribution limits.
You are restricted from putting resources into several assets classes through a 401(k), this includes real estate and precious metals; most of 401(k) money is put into mutual funds.
This plan is named after section 403(b) of the Internal Revenue Code.
It is a tax advantaged retirement plan which is only available to select public school workers, some churches ministers and tax-exempt not-for-profit organizations. Just like we have in the 403(b) plan, employee engaged in the 403(b) arrangement are able to concede cash from their paychecks into a retirement investment account.
As a matter of fact, 403(k)s act very much like the 401(k)s in many respect. Each of the two plans has a plan provider and plan administrator, and the options on investments available to a participant are limited when compared to what their specific plan offers. 403(b) plans were initially established to offer annuities as an investment choice as such it was originally referred to as “Tax Sheltered Annuities”.