SIMPLE's, are employer-sponsored plans for businesses with 100 or fewer   employees. Employers and employees can make plan contributions to a participating employee's IRA. To participate, employees must have earned at least $5,000 in each of the two preceding years and must be expected to earn $5,000 in the current year. 

Employee contributions are made pre-tax. However they are subject to FICA and FUTA, (Social Security and Medicare) tax. Direct employer contributions are not subject to FICA or FUTA taxes. Non-participation requirement rules DO NOT APPLY. 

Plan contributions are 100% vested to the employee. Distributions can be made at any time. Withdrawals are taxed as ordinary income, and a 10% penalty tax is incurred for distributions made prior to age 59.5. If funds are withdrawn in the first two years of participation by an employee then a 25% penalty tax applies. SIMPLE plans are ineligible for 10-year averaging. Since participants are 100% vested at all times, they can roll the money into their own IRA's.