SIMPLE IRA contribution limits for 2015 are $12,500 for those under age 50 and $15,500 for those aged 50 and over. We explain additional limits and restrictions below.
- Traditional IRA Contribution Limits
- Roth IRA Contribution Limits
- SIMPLE IRA Contribution Limits
- SEP IRA Contribution Limits
- Traditional 401k Contribution Limits
- Roth 401k Contribution Limits
- One-Participant 401k Contribution Limits
- Coverdell ESA Contribution Limits
- HSA Contribution Limits
SIMPLE IRA Contribution Limits
The table below shows the SIMPLE IRA contribution limits for 2014 and 2015.
As the table above shows, SIMPLE IRA contribution limits in 2014 for those under age 50 are $12,000 and for those over age 50 are $14,500.
In 2015, SIMPLE IRA contribution limits for those under age 50 are $12,500 and for those over age 50 are $15,500.
There are also contribution limits on the amounts employers can kick in to employee SIMPLE IRAs. Generally, those limits are the same as the limits on employee contributions. See below for more detail.
SIMPLE stands for Savings Incentive Match PLan for Employees. It’s a way for employers and their employees to contribute to traditional IRAs.
401(k) plans and other retirement plans have start up and operating costs that can prevent small employers from offering any retirement plans to their employees. SIMPLE IRA plans are a way for small employers to get around these retirement plan costs.
An employer can contribute to a SIMPLE IRA for his or her own retirement, or to plans for employees. Employees can also contribute to their own SIMPLE IRA plans.
Employers can deduct all contributions to employee SIMPLE IRAs. Employee contributions to SIMPLE IRAs are made pre-tax. The money in SIMPLE IRAs is only taxed upon withdrawal, just like with traditional IRAs.
Since SIMPLE IRAs have different types of contributions, there are different SIMPLE IRA contribution limits. The different types of SIMPLE IRA contributions are:
Salary Reduction Contributions
Salary reduction contributions are IRA contributions made by employees. They’re called salary reduction contributions because employees take money away from their salaries and put it into SIMPLE IRA plans. For instance, a woman who makes $50,000 a year might choose to put $5,000 a year into a SIMPLE IRA plan. Though she is saving $5,000 a year, the money is taken from her salary without being taxed, so she’ll only report $45,000 a year on her tax return.
SIMPLE IRA contribution limits for salary reduction contributions are $12,000 in 2014 and $12,500 in 2015 for those under age 50. For those over age 50 the SIMPLE IRA contribution limits are $14,500 for 2014 and $15,500 for 2015.
Employers must contribute something to each employee’s SIMPLE IRA plan. Employers can make either matching contributions or nonelective contributions (below). Matching contributions have to match whatever the employee contributes, up to a limit of 3% of the employee’s compensation for the year.
Here’s an example. Let’s say a man makes $100,000 a year. He contributes to his SIMPLE IRA to the limit of $12,500. If the man’s boss chooses matching contributions, the boss has to kick in $3,000 to the employee’s IRA, because $3,000 is 3% of $100,000.
Employers who don’t make matching contributions to employee SIMPLE IRAs have to make nonelective contributions. These contributions are a flat rate of 2% of the employee’s annual compensation. Consider an example where a man makes $100,000 a year and has a SIMPLE IRA. If his boss chooses to make nonelective contributions, the boss will kick in $2,000 to the IRA.
Nonelective SIMPLE IRA contribution limits are set at $5,200 in 2015.
Other SIMPLE IRA Contribution Limits and Facts
- Employees don’t have to contribute.
- Employers always have to contribute.
- Employers can’t offer any other type of retirement plan in addition to a SIMPLE IRA plan.
- SIMPLE IRAs have lower contribution limits than some other retirement plans.
- Employers can deduct all contributions they make to employee SIMPLE IRAs.
- All employee SIMPLE IRA contributions are tax free.
- Employees who participate in other employer plans with salary reduction contributions have total IRA contribution limits of $17,500 in 2014 and $18,000 in 2015.
- Employees aged 50 or older at the end of the calendar year can make catch up contributions. Catch up contribution limits are $2,500 in 2014 and $3,000 in 2015.
- Employers can choose to make matching contributions less than 3%, but they must be at least 1%. Reduced matching contributions like this can span no more than two years out of every five.
- Employees have until October 1st of the current year to open SIMPLE IRAs.
- Employers must deposit salary reduction contributions within 30 days of when the employee would have received the funds as compensation.
- Generally, employers have until the due date of their federal tax return to make matching contributions to employee SIMPLE IRAs.