How is a SIMPLE 401(k) different from a regular 401(k) for small-company employees?

A SIMPLE 401(k) is a streamlined plan that small employers (generally 100 or fewer employees) can offer with less administrative burden and no annual nondiscrimination testing. In exchange for that simplicity, it has a lower employee contribution limit than a standard 401(k), set annually by the IRS, and mandatory employer contributions.

The employer must either match up to 3% of pay dollar-for-dollar or make a 2% nonelective contribution for all eligible employees. A key employee-friendly feature: contributions in a SIMPLE 401(k) are always 100% vested immediately, unlike the delayed vesting common with regular 401(k) matches. If your small employer offers one, contribute at least enough to capture the mandatory match, and confirm the current year's lower deferral limit at irs.gov.