SIMPLE IRA Matching Contributions
For SIMPLE IRA employer contributions, does the match apply to catch-up contributions (assuming that the employee’s compensation is large enough to warrant a contribution where 3%= $28,000 or higher in ’09)?
For example, if a SIMPLE IRA participant makes $1,000,000 in 2009, is over age 50 and chooses to make the following contribution:
11,500 salary deferral
[u] 2,500 catch-up[/u]
[b]14,000 total employee contribution[/b]
Would the employer’s match look like this:
11,500 salary deferral match
[u] 2,500 catch-up match[/u]
[b]14,000 total employer matching contribution[/b]
Thus making the total contribution for the participant $28,000?
Permalink Submitted by Alanna Crawford on Fri, 2009-01-23 14:45
Any thoughts on this?
Permalink Submitted by BruceM on Fri, 2009-01-23 19:41
Generally, catch up contributions are made by the EE through salary deferral, not by the ER through elective or non-elective contributions.
But because the ER match maximum is set at a dollar-for-dollar basis up to 3% of the EE’s salary and NOT limited by the covered compensation rule, the ER may then effectively match the EE’s salary deferral inclusive of a catchup contribution….at least for those EE’s with a salary in 2009 of at least $466,667
The following is from the IRS web site
[i][b]What employer matching contribution is generally required under a SIMPLE IRA plan?[/b]
Under a SIMPLE IRA plan, an employer is generally required to make a contribution on behalf of each eligible employee in an amount equal to the employee’s salary reduction contributions (including catch-up contributions), up to a limit of 3 percent of the employee’s compensation for the entire calendar year.[/i]
BruceM
[quote=”[email protected]“]For SIMPLE IRA employer contributions, does the match apply to catch-up contributions (assuming that the employee’s compensation is large enough to warrant a contribution where 3%= $28,000 or higher in ’09)?
For example, if a SIMPLE IRA participant makes $1,000,000 in 2009, is over age 50 and chooses to make the following contribution:
11,500 salary deferral
[u] 2,500 catch-up[/u]
[b]14,000 total employee contribution[/b]
Would the employer’s match look like this:
11,500 salary deferral match
[u] 2,500 catch-up match[/u]
[b]14,000 total employer matching contribution[/b]
Thus making the total contribution for the participant $28,000?[/quote]
Permalink Submitted by Alanna Crawford on Fri, 2009-01-23 20:33
Perfect, thank you!
Permalink Submitted by Martin Helmer on Fri, 2009-01-23 20:49
There’s no question the employer may match the full $14,000. But it gets a little tricky where the employer DOES NOT WANT to match the catchups. This latter option is also doable, but to me there’s the question, “Does the written plan explicitly have to provide there will be no matching on catchups?” I’ll start from the position that the plan does have to be explicit. So if the Form 5305-SIMPLE is your plan document, I believe the employer must do the match because the plan doesn’t say otherwise.