Simple IRA for W-2 employees and 1099s

[Jeannine]

Can a Simple IRA for a business with less than 25 employees be established only for W-2 employees and exclude contractors paid through 1099?  If it can, anything they need to be careful about?

[Bri]

Actually, it has to - contractors aren't employees.

[Jeannine]

If it is a small business with a husband and wife team, can they be included as well?  From research it looks like they aren't considered W-2.  However, they did previously have a solok, so when they deferred into the plan, wouldn't that have been considered W-2?

Purpose of post - how can a husband and wife team along W-2 employees to be part of a retirement plan that doesn't require testing?  They are not interested in a 401k.

 

Thanks!

[Bri]

They could do a SIMPLE - nothing for non-employee contractors, W-2 employees would be offered if they met the eligibility rules being established, and the owners' contributions "from the company" beyond their deferrals would be a function of their net earnings from self employment (since they're owner-employees not getting W-2s).