Upgrade to “First Class”

The SIMPLE has been compared to having the middle seat on an airplane. Flying is a much faster way to travel long distances than driving, but it’s just not as good as having the window and definitely not as nice as flying first class. The SIMPLE IRA’s name is a bit misleading (it actually stands for Savings Incentive Match Plan for Employees). While both employer and employee can contribute to the plan, the employer must match and matching is vested immediately. Also, the employee contribution limit is set at $11,500 for 2011 and catch-up for those over age 50 is only $2,500. Also there is not a Roth option, loans or annual contribution increases. Almost all current SIMPLE contributions end up in expensive Retail Funds with individual accounts in actively managed funds many times with up front loads. SIMPLE’s also carry a 25% penalty if withdrawn within the first two years and you are not allowed to contribute to both a SIMPLE and 401(k) within the same year.

Since the SIMPLE already demands matching; it has already overcome the major stumbling block for the employer joining “The Cambridge Plan”. With that taken care of we can upgrade the client to first class (The Cambridge Plan) in most cases for less expense and pick up all the benefits of flying first class. Roth (many employees will be better off funding their portion of savings on a post tax basis including high income earners) and Loan options. Automatic annual increase using institutional portfolios tied to age based glide paths with potential of extended vesting schedules. On top of all these benefits each employee has the option of increasing their total contribution to as high as $22,000 for employee’s over age 50 from just $14,000 within the SIMPLE. Employees under age 50 can contribute $16,500 vs. $11,500. Ask each and every small business if they would like to upgrade to “First Class”.