Small business plans that require no testing such as a SIMPLE IRA sound great on paper, but they create a nightmare when you want to save more for retirement as an employer.
The problem is that a SIMPLE plan has to be the exclusive plan for your business for the year. If you want to put more into a defined benefit plan or benefit from the higher contribution limits of a 401(k) plan, there are certain limitations for mid-year changes (even with recent law changes). You may have to wait for the year to end. The bigger problem is when plan providers set you up with a new plan and don’t ask if you have a SIMPLE or you just don’t volunteer that you do. There are a whole host of compliance issues when you set up a new plan in a year where you have an active SIMPLE. While competent plan providers will ask you if you have another plan, other providers may just be too interested in a sale to ask. Either way, SIMPLE plans aren’t that simple when you want to save more for retirement.
