The SIMPLE IRA is a retirement plan that allows employers and employees to contribute funds, with contribution limits set by the IRS. Employee contributions are limited to salary reductions and catch-up contributions, while employer contributions depend on the type of contribution and cannot exceed 3% of the employee’s compensation. Non-elective employer contributions can also be made at 2% of the employee’s compensation. Contact the employer or retirement account owner for more information.
An Employee Savings Incentive Matching Plan The Individual Retirement Account (SIMPLE IRA) is a retirement plan that allows employers and employees to contribute funds. Contributions that can be made to a SIMPLE IRA include salary reduction contributions made by employees and matching contributions made by employers. Employer contributions to a SIMPLE IRA may also include non-elective employer contributions. There is a contribution limit for each type of contribution under the SIMPLE IRA plan.
SIMPLE IRA employee contribution limits are normally set annually or semi-annually by the government that controls and monitors taxes and tax payments. In the United States, SIMPLE IRA contribution limits are set by the Internal Revenue Service (IRS). For 2010 and 2011, the SIMPLE IRA salary reduction contribution limit is $11,500 United States dollars (USD). The SIMPLE IRA employee contribution limit for employees who contribute to more than one plan is $16,500.
After age 50, those who own a SIMPLE IRA can make additional contributions known as catch-up contributions. The maximum recovery contribution for 2010 and 2011 is $2,500 USD. Salary reductions and catch-up contributions are the only types of employee contributions that can be made to a SIMPLE IRA.
SIMPLE IRA contribution limits for employer contributions are a bit more complex. These limits depend on whether the employer is making a dollar-for-dollar matching contribution, a lower contribution, or a non-elective contribution. If the employer is making a dollar-for-dollar contribution, it is allowed to contribute an amount that matches the employee’s salary reduction contribution, but only up to 3% of the employee’s compensation.
If the employer chooses to contribute to an employee’s retirement plan at a lower percentage, it must make a contribution of at least 1%. Also, employers can do this for no more than two out of five years. If an employer chooses to contribute at a lower percentage, it must notify the employee in a timely manner. Employers should be sure to research all regulations regarding this matter before making a decision to properly follow all rules regarding retirement plan contributions and SIMPLE IRA contribution limits.
Non-elective employer contributions may also be made by employers. Non-elective contributions to a Simple IRA can be made at 2% of the employee’s compensation. For 2010 and 2011, contributions can be made to an employee’s SIMPLE IRA up to the first $245,000 of the employee’s salary or compensation.
An employee can contact their employer or the company’s human resources department for information on current SIMPLE IRA contributions. For additional information about SIMPLE IRA plans and SIMPLE IRA contribution limits, you should contact the employer or retirement account owner. There is also information about these plans on government tax, retirement, and finance websites.
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