Identify the correct statement regarding a savings incentive match plan for employees (SIMPLE plan).

Distributions from SIMPLE IRAs within the first two years of an employee's participation are subject to a 10% penalty tax unless rolled over to another IRA.

Vesting requirements are applicable to a SIMPLE IRA.

The maximum compensation limit under IRC Section 401(a)(17) does not apply for purposes of employer matching contributions to a SIMPLE IRA plan.

The employer matching contribution of 3% can be reduced to as low as 1% in two out of five years under both a SIMPLE IRA and a SIMPLE 401(k) plan.