What is the primary characteristic of a SIMPLE IRA?

A SIMPLE IRA, which stands for Savings Incentive Match Plan for Employees Individual Retirement Account, is designed primarily for small businesses with 100 or fewer employees. One of its most significant features is that it allows employers to make matching contributions to their employees' retirement savings. This aspect encourages employees to save for retirement while also providing an incentive for employers to match those contributions.

The program simplifies the process of retirement savings for both employees and employers by having straightforward rules and low administrative costs. In addition to the matching contributions from employers, employees can also make salary reduction contributions, providing a dual-layer of funding for their retirement accounts. These contributions help build a more robust retirement portfolio.

This feature is what distinguishes SIMPLE IRAs from other types of retirement accounts, which may not offer employer matching, such as traditional IRAs or Roth IRAs.