Corporations, partnerships, sole proprietorships, tax-exempt entities and state or local governments (without another retirement program) can establish a Simple IRA.
To do so, you can have no more than 100 employees and they must receive at least $5,000 in compensation during any two previous years.
Plans must be established between January 1 and September 30 each year. While employer contributions are required, employee contributions are voluntary. The employer contributions must be made by the employer tax return date plus any extensions. The employee deferral contributions must be made no later than 30 days after the last day of the month to which the salary deferral amounts relate. The employer/taxpayer directs the investments.
Several advantages of a Simple IRA include the following: contributions are deductible for the employer, there is no discrimination testing, they are not subject to top heavy rules, there is some funding responsibility with employees and deferral reduces taxable income to the employee.