Rollover to PAC Financial

Making the Switch to a SIMPLE IRA

The SIMPLE IRA: A Retirement Plan That Works for Small Businesses

A SIMPLE IRA gives you lower costs, less paperwork, and employees who feel genuinely valued. Without any of the 401(k) complications.

Do You Qualify? The Quick Check

Check if your situation fits all three:

1. You have 100 or fewer employees (they need to have earned $5,000+ last year to be eligible)
2. You have no other retirement plan, or you're ready to shut down your current 401(k) and switch to SIMPLE IRA
3. You'll contribute for your team — either matching contributions up to 3% of pay, or a flat 2% contribution for all employees

If all three apply, you qualify. If you're not sure, call us and we'll walk through it.

Your Two Options

Option 1: Ditching Your 401(k) for Good

You're running a 401(k) and you're tired of it. Form 5500 filings, compliance testing, TPA bills. You want out.

Terminate the 401(k) by December 31. Your SIMPLE IRA launches January 1. You can't run both in the same year, but that keeps things clean.

We manage everything: termination paperwork, employee communication, rollovers, and launching the SIMPLE IRA. You don't get caught juggling two systems for months.

Option 2: Starting a Retirement Plan from Scratch

If you've never offered a retirement plan, SIMPLE IRA is the easiest option. No Form 5500 paperwork, no discrimination testing, no TPA fees (TPA = Third Party Administrator). Just straightforward setup.

Launch anytime from January 1 through October 1. Setup takes just a couple of IRS forms.

What This Costs vs. What It Saves You

Switching to SIMPLE IRA typically saves $9,650 per year in administrative costs.

Let's compare with a typical Central Pennsylvania business: 25 employees, average salary $55,000.

Cost of running a 401(k):

• TPA fees: $2,000–$5,000
• Compliance testing: $1,500–$3,000
• Form 5500 preparation: $1,000–$2,000
• Correction costs: $500–$2,000
• Total: $6,000–$17,000 per year

Cost of running a SIMPLE IRA:

• Total: $0

Over 10 years, that $9,650 annual savings adds up to $96,500 staying in your business.

With a SIMPLE IRA, every dollar you contribute goes directly into employee accounts. With a 401(k), part of it gets eaten by administrative costs.

The Tax Benefit: What You and Your Employees Save

Every employer dollar is fully tax-deductible with no limit. Your contributions are completely deductible. Your employees get a tax break too: their contributions reduce their taxable income. It's a real win for both of you.

2026 SIMPLE IRA Contribution Limits

Contribution limits are adjusted annually by the IRS. Your tax advisor can confirm what applies to your specific situation.

Why Your Team Will Actually Appreciate This

Replacing one good employee costs 50–200% of their salary. Recruiting and training a replacement for a $55,000 employee runs $27,500–$110,000. Add in lost productivity, and turnover is expensive.

A SIMPLE IRA is a retention tool because it's honest. With a 401(k), you can delay vesting. Employees see "You own this after 3 years," leave after two, and lose money. Resentment follows.

A SIMPLE IRA works differently. Employees own 100% of your match the moment it hits their account. They know it's real. They know it's theirs. The money grows tax-deferred, so no taxes until they withdraw it. That transparency builds real loyalty, not forced retention but genuine appreciation.

The Details You Should Know

When You Can Start

Launch a SIMPLE IRA anytime from January 1 through October 1. If you're switching from a 401(k), shut it down by December 31 and start fresh January 1. Clean and simple.

Who's Eligible

Any employee who earned $5,000+ in the past two years and expects to earn $5,000+ this year qualifies. You can be more generous, but you can't be more restrictive.

Money In (Employee Perspective)

Employees can withdraw anytime, but there are tax penalties if they do before age 59½. If they withdraw within their first two years in the plan, they face an extra 25% penalty on top of the standard 10%. After two years, standard IRA withdrawal rules apply.

Money Out (Switching Plans)

Employees can roll a SIMPLE IRA balance to another SIMPLE IRA anytime without taxes. If they want to move it to a traditional IRA or 401(k) elsewhere, they must wait two years after joining the SIMPLE IRA. That two-year rule protects the plan structure.

Your Job as Employer

No Form 5500 filings. Employee contributions come out pre-tax (but subject to Social Security and Medicare taxes). Your contributions — matches or nonelective — are fully tax-deductible and not subject to Social Security/Medicare taxes.

Ready to Make the Switch?

Whether you're leaving a 401(k) or launching your first plan, we handle it. PAC Financial manages plan design, employee communication, payroll integration, and the rest. You focus on running your business.

If a SIMPLE IRA sounds right, let's talk. No pressure. Just a real conversation about whether this works for your company.

Give us a call TODAY at 717-564-6400 and let's walk through your options.

Model estimates are based on hypothetical assumptions: 25 employees, average salary $55,000, 3% employer match, 21% corporate tax rate. Actual results will vary based on individual circumstances, plan design, and market performance. This illustration is provided for educational purposes only and does not constitute a guarantee of future results. All 2026 contribution limits are subject to change based on IRS cost-of-living adjustments.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.

Securities and Investment Advisory Services offered through Osaic Wealth, Inc., Member FINRA/SIPC and Registered Investment Advisor. Insurance services offered through PAC Financial, which is not affiliated with Osaic Wealth, Inc.

This communication is strictly intended for individuals residing in the states of CO, DE, FL, GA, MD, MI, NC, NJ, NY, PA, SC, VA. No offers may be made or accepted from any resident outside the specific state(s) referenced.