SIMPLE IRA maximum matching contribution
What is the maximum matching contribution dollar amount that can be made for an employee assuming a 3% match. For example if they are making a million dollars can they match 30k?
Thank you.
What is the maximum matching contribution dollar amount that can be made for an employee assuming a 3% match. For example if they are making a million dollars can they match 30k?
Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2015-10-13 01:16
No. The maximum match is either 3% of the compensation (30,000) or the dollar amount of the salary reduction contributions, whichever is LESS. Since the employee has a maximum possible salary deferral of 12,500 (plus 3,000 catch up if applicable) the salary reduction contribution would be less than 30,000.
Permalink Submitted by Jack Thomas on Tue, 2015-10-13 19:54
So in 2015, someone over age 50 is making a little over $500,000, then the max that could go into their plan is approximately $31,000 ($15,500 as an employer salary reduction and roughly $15,500 as an employer match assuming a 3% match).Is that right?
Permalink Submitted by Alan - IRA critic on Tue, 2015-10-13 20:04
Correct. This assumes that the employee is not making any elective deferrals to any other plans at different employers.
Permalink Submitted by Jack Thomas on Tue, 2015-10-13 20:13
OK, great. Thanks. And one other question that just came up about employee contributions. How long does the employer have to put the funds in the SIMPLE. IRS website says 30 days, but they also reference a 7 day DOL safe harbor for smaller plans. Could you please clarify the difference? Thank you.
Permalink Submitted by Alan - IRA critic on Wed, 2015-10-14 03:06
The 7 days from the pay date is a safe harbor and funds deposited within that period are automatically deemed to have been deposited within a reasonable time. The period of time between 7 days and 30 days is a gray area under which a violation may or may not have been committed. The 30 days is an outside limit that makes for an automatic violation.
Permalink Submitted by David Mertz on Wed, 2015-10-14 11:34
I believe that the 30-day requirement is the requirement that must be met to avoid the potential for the SIMPLE plan to be disqualified by the IRS and the 7-day requirement is the safe-harbor deadline to guarantee avoiding other penalties from the DOL. (I don’t know what the specific DOL penalties are.)