Simple Fix - retirement plans for small business - Questions and Answers

Kiplinger's Personal Finance Magazine, June, 2000 by Kimberly Lankford

Q&A | How to pick the right RETIREMENT PLAN for your small business.

I own a small business--fewer than five employees--and want to set up a SIMPLE IRA retirement plan. But I'm having a terrible time finding out who offers these plans, let alone what the rules are. Can you help? --SHARON WILLIAMS DEPAMPHILIS, Harrisburg, Pa.

The blessing of a Savings Incentive Match Plan for Employees, or SIMPLE--it's easy to set up and inexpensive to run--is also the curse: Because such plans are not big business, they get little publicity.

But most mutual fund companies and brokerage firms that offer individual IRAs also offer SIMPLE plans, which are open only to firms with no more than 100 employees. There's usually no charge to set up a plan, and employees generally have the same investment options and pay the same fees as if they had an individual IRA with the firm. Accounts may be free, for example, or cost $40 a year or so.

SIMPLEs are a cross between 401(k) plans and IRAs, but without the government's 401(k) rules. Employees decide how much of their salary to divert to the plan (up to $6,000 per year). You must match your employees' contributions either dollar for dollar (up to 3% of salary), or by depositing a flat 2% of salary to each account.

Employees control how their money is invested. The investment options available are the key when comparing providers.

Top-Yielding Money-Market Mutual Funds

                                            RECENT         MIN.
Taxable                                  30-DAY YIELD    INVEST.

1. Strong Investors(*)                       5.94%        $1,000
2. Aon(*)                                    5.80         10,000
3. Bunker Hill                               5.77          5,000
4. Fidelity Cash Reserves                    5.75          2,500
5. Excelsior Government(*)                   5.74            500
NATL AVERAGE                                 5.36%

                                  WEB ADDRESS           TOOL-FREE
Taxable                             (WWW.)                 NUMBER

1. Strong Investors(*)            estrong.com        800-368-1030
2. Aon(*)                             (#)            800-266-3637
3. Bunker Hill                    payden.com         800-572-9336
4. Fidelity Cash Reserves        fidelity.com        800-544-8888
5. Excelsior Government(*)    excelsiorfunds.com     800-446-1012
NATL AVERAGE

                                                   TAX. EQ. YIELD
                                 RECENT                28%/31%
Tax-free                      30-DAY YIELD            BRACKET

1. Strong                         3.73%               5.2%/5.4%
2. Vanguard                       3.60                 5.0/5.2
3. Calvert Tax-Free               3.49                 4.8/5.1
4. USAA                           3.47                 4.8/5.0
5. Zurich                         3.45                 4.8/5.0
NATL AVERAGE                      3.12%               4.3%/4.5%

                         MIN.       WEB ADDRESS        TOLL-FREE
Tax-free                INVEST.        (WWW.)           NUMBER

1. Strong               22,500       estrong.com      800-368-1030
2. Vanguard              3,000       vanguard.com     800-635-1511
3. Calvert Tax-Free      2,000       calvert.com      800-368-2748
4. USAA                  3,000           (#)          800-531-8448
5. Zurich                1,000      zurichfunds.com   888-523-4140
NATL AVERAGE

(*) Fund is waiving all or a portion of its expenses. (#) Rates not available on Web site.

SOURCE: Money Fund Report, iMoneyNet Inc., One Research Dr., Westborough, MA 01585; 508-616-6600; http://www.imoneynet.com

Top-Yielding Certificates of Deposit

                                         RECENT        MIN.
6-month                                ANN. YIELD     AMOUNT

1. USAccess Bank (Ky.)([dagger])          6.72%        $ 500
2. nBank (Ga.)                            6.72         5,000
3. Bank CaroLine (S.C.)([dagger])         6.70           500
4. Nexity Bank (Ala.)([dagger])           6.70         1,000
5. BankDirect (Tex.)([dagger])            6.65         2,000
NATL AVERAGE                              4.90%

                                       WEB ADDRESS       TOLL-FREE
6-month                                  (WWW.)            NUMBER

1. USAccess Bank (Ky.)([dagger])    usaccessbank.com    877-369-2265
2. nBank (Ga.)                          nbank.com       800-332-8231
3. Bank CaroLine (S.C.)([dagger])   bankcaroline.com    877-692-2765
4. Nexity Bank (Ala.)([dagger])      nexitybank.com     877-738-6391
5. BankDirect (Tex.)([dagger])       bankdirect.com     877-839-2737
NATL AVERAGE

1-year                                      RECENT         MIN.
                                          ANN, YIELD      AMOUNT

1. USAccess Bank (Ky.)t                      7.05%         $ 500
2. Claritybank.com (Tex.)t                   7.00          1,000
3. Bank CaroLine (S.C.)t                     7.00            500
4. Providian National (N.H.)                 7.00         10,000
5. TeleBank (Va.)                            6.98          1,000
NATL AVERAGE                                 5.36%

1-year                               WEB ADDRESS         TOLL-FREE
                                       (WWW.)              NUMBER

1. USAccess Bank (Ky.)t             usaccessbank.com    877-369-2265
2. Claritybank.com (Tex.)t           claritybank.com    888-252-7489
3. Bank CaroLine (S.C.)t            bankcaroline.com    877-692-2765
4. Providian National (N.H.)          providian.com     800-414-9692
5. TeleBank (Va.)                  telebankonline.com   800-835-3226
NATL AVERAGE

5-year                                 RECENT            MIN.
                                     ANN, YIELD         AMOUNT

1. Key Bank (N.Y.)                      7.41%          $ 5,000
2. Providian National (N.H.)            7.35            10,000
3. Claritybank.com (Tex.)([dagger])     7.30             1,000
4. TeleBank (Va.)                       7.30             1,000
5. MBNA America (Del.)                  7.30            10,000
NATL AVERAGE                            6.01%

5-year                               WEB ADDRESS        TOLL-FREE
                                       (WWW.)             NUMBER

1. Key Bank (N.Y.)                   keybank.com       800-872-5553
2. Providian National (N.H.)        providian.com      800-414-9692
3. Claritybank.com
     (Tex.)([dagger])              claritybank.com     888-252-7489
4. TeleBank (Va.)                telebankonline.com    800-835-3226
5. MBNA America (Del.)            goldportfolio.com    800-577-3556
NATL AVERAGE