Question

1 Which of the following statements is correct concerning a SIMPLE plan?

A SIMPLE plan has more complex administration than a 401(k).

A SIMPLE plan has only a few options for employer matching percentages, while a 401(k) has no limit to the matching percentage.

A SIMPLE is best used with a large to medium sized company.

Both SIMPLE plans and 401(k)s permit plan loans.

2 An employer can sponsor both a SIMPLE and a money-purchase pension plan.

True

False

Answer 1

Question 1

1. Complex administration and limit costs are less in SIMPLE plans than 401(k). So the given statement is INCORRECT.
2. Options for employer matching percentages are available in SIMPLE plans and such option is not available for 401(k)s. So the given statement is INCORRECT.
3. A SIMPLE plan is suitable for large to medium sized company. 401(k) is suitable for small businesses. So the given statement is CORRECT.
4. In SIMPLE plans, loans are not allowed. On the other hand loan as a feature is allowed in a 401(k) plan. So the given statement is INCORRECT.

Question 2

Answer : FALSE

In a SIMPLE plan, the employer cannot offer any other plan type along with the SIMPLE plan. This disadvantage is only with SIMPLE plan. With other plans, such options are available.