Function

• Though SIMPLE IRAs work much like traditional and Roth IRAs, they are administered by small employers and often constitute a major portion of employee retirement savings. As such, SIMPLE IRA contribution limits are much higher than that of traditional and Roth IRAs.
  
  

Employee Contributions

• In 2010, employees under 50 can contribute $11,500 to a SIMPLE IRA; those 50 and over can contribute up to $14,000. The IRS annually reviews these limits and adjusts them to coincide with cost of living increases.
  
  

Employer Contributions

• Employers who offer SIMPLE IRAs are obligated to match employee contributions with up to 3 percent of an employee's income. Alternately, employers can contribute a flat 2 percent of employee income (up to $245,000 in 2010), regardless of how much employees contribute.
  
  

Benefits

• SIMPLE IRAs are cheap to operate and allow employers some flexibility. In two out of five years, employers can lower matching contributions to 1 or 2 percent of employee income. Employees have no obligation to contribute to a SIMPLE IRA whatsoever.