What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a simple retirement plan?

In the context of setting up a SIMPLE (Savings Incentive Match Plan for Employees) retirement plan, the correct maximum number of employees an employer can have is 100. This rule is established by the IRS, which stipulates that an employer with no more than 100 employees who earned at least $5,000 in the preceding year is eligible to establish a SIMPLE plan.

The distinction of having a maximum employee count is significant because SIMPLE plans are designed for smaller businesses that may not have the resources to manage the more extensive retirement plan options available. This eligibility criterion ensures that the benefits of a SIMPLE plan cater specifically to small employers seeking to offer retirement savings options to their employees.

Employers exceeding this threshold would be directed towards different types of retirement plan structures that have more complex administrative requirements and offerings, reflecting the need to accommodate larger employee bases.