How much must be contributed for employees participating in a SIMPLE IRA plan?
In addition to the employees’ salary reduction contributions, the employer is generally required to match each employee’s salary reduction contribution on a dollar-for-dollar basis up to 3% of the employee’s compensation. Instead of the matching contribution, the employer may choose to make nonelective contributions of 2% of the employee’s compensation (compensation used for this contribution is limited to $230,000 in 2008, $245,000 in 2009 and is subject to cost-of-living adjustments for later years). If the employer chooses to make nonelective contributions, it must make them for all eligible employees whether or not they make salary reduction contributions. However, the employer may choose to give the nonelective contributions only to eligible employees who make $5,000 or more in the year, if the document so provides.
In addition to the employees’ salary reduction contributions, the employer is generally required to match each employee’s salary reduction contribution on a dollar-for-dollar basis up to 3% of the employee’s compensation. Instead of the matching contribution, the employer may choose to make nonelective contributions of 2% of the employee’s compensation (compensation used for this contribution is limited to $225,000 in 2007, $230,000 in 2008 and is subject to cost-of-living adjustments for later years). If the employer chooses to make nonelective contributions, it must make them for all eligible employees whether or not they make salary reduction contributions. However, the employer may choose to give the nonelective contributions only to eligible employees who make $5,000 or more in the year, if the document so provides.
Related Questions
- Are Savings Incentive Match Plan for Employees (SIMPLE) IRA plan participants allowed to contribute to a Traditional or Roth IRA?
- If my SIMPLE IRA plan fails to meet the SIMPLE IRA plan requirements, are the tax benefits for my employees and myself lost?
- How much must an employer contribute to the Savings Incentive Match Plan for Employees (SIMPLE) IRA?
