What Are the Contribution Limits for My SIMPLE IRA?

SIMPLEs allow higher employee deferrals than most retirement accounts. Employees are only able to make salary reduction contributions.

As of 2016, they are able to defer up to $12,500 a year, but if an employee is over 50, they may defer an additional $3,000 as a “catch-up” contribution. However, an employee may choose not to contribute anything to their SIMPLE IRA.

Employers, on the other hand, are required to make either a dollar-for-dollar matching contribution of 3%, or a non-elective contribution of 2% of the employee’s pay. The 3% match can be reduced to 1% in two out of five years if employees are notified before they make contributions.

The match is based on actual compensation instead of a maximum considered compensation limit, such as $265,000, as in some retirement plans. As with other IRAs, equal treatment of employees is essential. The employer may choose the method for contributions, but each employee is entitled to the same conditions.