simple plans

Submitted by Jon Heller on Thu, 2015-01-15 19:10

I have a client who works for one employer that he is an active participant in the company simple plan. The client also owns his own business and is wondering if he can have a simple plan and make contributions into it. He is aware of the contribution limit of $12,500 Thanks



Submitted by Alan - IRA critic on Fri, 2015-01-16 00:03

There are 3 limits to consider:

  1. SIMPLE IRA plan salary reduction contribution limit of 12,500
  2. 402(g) elective deferral limit of 18,000 in the aggregate
  3. Controlled group rules determining how many SIMPLE IRAs the taxpayer can participate in

Therefore, if he has limited or no ownership interest in the first plan, he can establish a SIMPLE for his own business. But the elective deferral limit will result in reducing the salary reduction contribution to 5,500 for one of the plans if he maxes out the other plan.

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