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How is a SIMPLE Roth IRA different from a regular SIMPLE IRA?

The primary difference between a SIMPLE Roth IRA and a traditional SIMPLE IRA is when taxes are paid. The plan structure itself remains the same, but the tax treatment of employee contributions and withdrawals is different.

With a traditional SIMPLE IRA, employee salary deferrals are typically made on a pre-tax basis. This can lower taxable income in the year of contribution, but withdrawals in retirement are generally taxed as ordinary income.

With a SIMPLE Roth IRA, employee salary deferrals are made after taxes have already been applied. These contributions do not reduce current taxable income, but qualified withdrawals in retirement are generally tax-free.

Both account types can exist under the same SIMPLE IRA plan if the employer has adopted the Roth feature. Contribution limits and many plan rules are shared, but the timing of taxation is different.