Clarification on SIMPLE IRA Eligibility
Thanks for all the helpful info on SIMPLE IRAs so far. Two more questions:
1) Employer states that employees need to be with the company 2 years and have made $5,000. Say employee began work in January 2014. Based on the eligibility requirements that person would not be eligible to participate in the plan until January 2017 (assuming they made $5,000), is that correct? Because they would not have had 2 years of employment until January 2016 which means they cannot enter the plan until 2017 when the next calendar year begins.
2) Employer states the employee needs to be with the company for 1 year and make $100. If someone joins the company in December 2015 and makes $100 before the end of the year, then they are eligible to participate in the plan January 1, 2016, is that correct?
Thanks, just double checking to make sure we are reading the rules accurately.
Permalink Submitted by Alan - IRA critic on Fri, 2015-10-23 18:29
2) is correct, but 1 is not. The 2 years are calendar years with earnings, not a consecutive period measured like the 2 year waiting period to roll out amounts to a non SIMPLE IRA or take distributions. If this employee made 5,000 in both 2014 and 2015, they are eligible for the SIMPLE IRA 1/1/2016 because the met the requirement in two prior calendar years. No need to wait until 2017.
Permalink Submitted by Jack Thomas on Fri, 2015-10-23 19:03
So $5,000 total between the 2 years? (Not 5k per year).
Permalink Submitted by Alan - IRA critic on Fri, 2015-10-23 19:07
No, at least 5,000 in both years (each year). For any year where earnings were less than 5,000 that calendar year does not count.