SIMPLE stands for "Savings Incentive Match Plan for Employees". A SIMPLE plan is a written arrangement that provides you and your employees with a simplified way to make contributions to provide retirement income. Under a SIMPLE plan, employees can choose to make salary reduction contributions to the plan rather than receiving these amounts as part of their regular pay. In addition, as their employer you must contribute matching or nonelective contributions.
SIMPLE 401(k): You can adopt a SIMPLE plan as part of a 401(k) plan only if you had 100 or fewer employees who received $5,000 or more in compensation from you for the preceding year. Under this rule, you must take into account all employees employed at any time during the calendar year regardless of whether they are eligible to participate. Employees include self-employed individuals who received earned income.