SIMPLE IRA Match
Good Afternoon,
I understand that a SIMPLE plan sponsor can lower the match to as little as 1% in 2 out every 5 years.
question:
Can the sponsor, for example, implement a 1% match for year 1 and 2 then swich to the 2% non-elective for year 3,4, or 5? Or does the sponsor have to use the 3% match for years 3,4, and 5? in essence waiting until year 5 to switch to the 2% non-elective?
Thank you,
Brian
Permalink Submitted by Alan Spross on Tue, 2012-09-11 21:06
The employer can change to 2% non elective contributions for any year. Therefore, a matching contribution of 1% for two years can be followed by non elective contributions in the 3rd year. For purposes of the 2 out of 5 rule for matching contributions, any non elective year is considered to count as a 3% matching year. Therefore, after 3 years of non elective contributions, the employer could follow that with a return to 1% matching for 2 years as that would meet the 2 of 5 requirement.
Of course, proper notification of these annual changes must be made to the employees no later than 11/1 of the year prior to the year of change.