SIMPLE IRA
Client selected non elective contribution on 5305 for SIMPLE IRA. Client just established SIMPLE IRA plan a few months ago. He processed payroll for the first 2 months and gave employees 3%, rather than non elective 2%.
Does he need to back out contributions because gave too much?
Can he switch to 2% contributions now?
Permalink Submitted by Alan - IRA critic on Wed, 2023-06-28 16:58
Client could calculate the excess contributed for each employee, and then reduce future contributions to bring the total into balance, and stick with the non elective contributions for the remainder of the year per the existing SIMPLE plan document. Non elective contributions are due the employee whether they contribute or not and that could produce quite different results than a matching employer contribution.