Introduced by the Small Business Job Protection Act of 1996, SIMPLE is an acronym that stands for "savings incentive match plan for employees." The primary catch with the SIMPLE-IRA is that employers are required to make IRA contributions to the plan. Employers have two types of contributory options available to them.

The first contribution method encourages employee participation by requiring the employer to match all employee contributions up to 3% of their salaries, with a $6,000 limit. In addition, employers are allowed to match a lower percentage of employee contributions for two out of every five years.

The second option is a fixed IRA contribution plan. In this case, employers pay a flat 2% of a worker's salary, up to a maximum of $3200. This contribution is required for all participating employees, regardless of whether the employees contribute on their own. A 401(k) plan, in contrast, does not require employer contribution.