Table Of Simple IRA Contribution Limits
The SIMPLE IRA or the Savings Incentive Match Plan for Employees IRA, is a retirement plan established by employers who have 100 or less employees. This type of retirement plan is primarily meant for those small scale businesses who do not sponsor any other type of retirement plan. |
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If an employer has a SIMPLE IRA plan, then the employer must take the burden of providing for the employee's retirement. In other words, whether an employee decides to contribute or not, the employer must contribute to the plan.
When it comes to contribution to a SIMPLE IRA, the employee contributes a part of his salary before tax. However, the employee can also decide not to contribute to the plan if he does not wish to. This contribution of pre-tax money is known as elective deferral contribution.
On the other hand, the employer must contribute to the plan irrespective of the employee's contribution. However, an employer may decide to decide to match the employee's contribution or opt for nonelective contribution. The matching contribution cannot exceed more than 3 percent of the employee's salary. And, the nonelective contribution should be 2 percent of the salary.
For 2009, the maximum contribution allowed by the employee is $11,500, which includes the cost of living adjustment increases. If an employee is 50 years or older, he can make an additional $2,500 contribution as a catch up contribution.
If an employer makes matching contribution of 3 percent, he can reduce his share of contribution to 1 percent for two years out of five. Or, the employer can contribute 2 percent of nonelective contribution instead of the 3 percent matching contribution for any given year. However, the rule stipulates that for any year when an employer replaces the 3 percent matching contribution with the 2 percent nonelective contribution, it is still taken as if the employer made a 3 percent matching contribution.
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