Permalink Submitted by Martin Helmer on Mon, 2010-09-13 16:42
Even if the business has only one person, the limit is the sum of employer contributions plus employee contributions. Each party is limited to $11,5000, unless age 50 catchup is involved. The employee can put in as much as 100% of his earnings, limited to $11,500. The employer can contribute as much as 3% of the employee’s earnings, which can be either in the form of 1, 2, or 3% matching or a 2% nonelective contribution given to all eligible employees, whether or not they themselves contribute. In order to receive the maximum $11,500 employer contribution using the maximum 3% matching rate, the employee would need to earn over $383,000.
Permalink Submitted by Peter Welsh on Mon, 2010-09-13 19:35
Thanks Martin,
That’s is how I would have calculated it as well, my hesitation was the annual compensation limit for qualified plans of $245,000. I know the Simple is a bit of a hybred so I guess is not governed by this limit?
Permalink Submitted by Martin Helmer on Mon, 2010-09-13 20:09
Now that you mention it, the $245,000 compensation limit does not apply to the SIMPLE matching contribution made by the employer, and it does apply to the employer nonelective contribution @2% of pay, so the maximum employer contribution that’s not a match would be 2% of $245,000, or $4,900.
Permalink Submitted by Martin Helmer on Mon, 2010-09-13 16:42
Even if the business has only one person, the limit is the sum of employer contributions plus employee contributions. Each party is limited to $11,5000, unless age 50 catchup is involved. The employee can put in as much as 100% of his earnings, limited to $11,500. The employer can contribute as much as 3% of the employee’s earnings, which can be either in the form of 1, 2, or 3% matching or a 2% nonelective contribution given to all eligible employees, whether or not they themselves contribute. In order to receive the maximum $11,500 employer contribution using the maximum 3% matching rate, the employee would need to earn over $383,000.
Permalink Submitted by Peter Welsh on Mon, 2010-09-13 19:35
Thanks Martin,
That’s is how I would have calculated it as well, my hesitation was the annual compensation limit for qualified plans of $245,000. I know the Simple is a bit of a hybred so I guess is not governed by this limit?
Permalink Submitted by Martin Helmer on Mon, 2010-09-13 20:09
Now that you mention it, the $245,000 compensation limit does not apply to the SIMPLE matching contribution made by the employer, and it does apply to the employer nonelective contribution @2% of pay, so the maximum employer contribution that’s not a match would be 2% of $245,000, or $4,900.