Changing SIMPLE IRA Contribution Amount

Submitted by Brandon Blanchard on Wed, 2024-05-15 15:11

I have a client that has been funding a SIMPLE IRA through his employer for about 2 years. Can he increase/decrease his employee payroll contribution into his SIMPLE IRA whenever he wants throughout the year and as frequently as he wants? Or can he only change his payroll contribution amount during the fall open enrollment period for the upcoming year? I know employees can only enroll in SIMPLE IRAs during the fall open enrollment and can’t opt in whenever the choose to but wasn’t sure if that rule also applies to changing contribution amounts for those already participating in the SIMPLE IRA.



Submitted by Alan - IRA critic on Wed, 2024-05-15 15:54

Changing the employee election is subject to the plan can be done at the election of the employer. For example, per Notice 98-4 the employer could provide for quarterly election periods to supplement the annual election at year end. The only IRS requirement is that a plan MUST allow the employee to terminate SIMPLE contributions anytime, but if the plan does not offer the flexibility to resume contributions, the employee would have to wait until the annual election. I don’t think many employers offer these additional options.

Submitted by Matt Mason on Fri, 2024-06-28 17:21

In regards to a side note in his question and because I have been told opposite ways, could you reflect on the following?

In a Simple IRA, once an employee is eligible, should they not choose to sign up January 1, are they eligible to signup at other periods during the year/future years or would they be required to signup the following January 1.  The plan I’m following has a semi annual Salary Deferral Election Period noted, Jan 1 & July 1 effectively.  I had also been told in the past, this was simply for adjusting deferrals for those already enrolled and that a person could not sign up mid year.

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