SIMPLE IRA Maximums

Submitted by Alanna Crawford on Wed, 2013-03-06 18:21

If a client is a participant in two SIMPLE IRAs, are they limited to a $12,000 salary deferral overall and “unlimited” employer contributions (within 3% of compensation limit)? Or, would the participant be eligible to contribute up to $12,000 into both and receive employer contributions accordingly?

The participant is under age 50.

Thanks!



Submitted by Alan - IRA critic on Wed, 2013-03-06 20:55

The annual SIMPLE IRA salary reduction contributions cannot exceed 12k in total. Matching is separate. If one of the plans had a 2% non elective contribution. the total matching would be higher if the salary reductions were made to the plan with the 3% matching contributions. Otherwise, it would not matter how much was deferred in each plan.

Submitted by Martin Helmer on Thu, 2013-03-07 00:00

IRS has indicated the 402(g) limit applies in this situation.  So the elective deferral limit is $17000 for 2012.

Submitted by Alan - IRA critic on Thu, 2013-03-07 04:32

Good catch, Martin. I was aware of the overall 402g limit with SIMPLE and 401k plan deferrals, but thought that the 12k was a total employee SIMPLE IRA deferral limit. Rather, for non affiliated employers the 12k limit is “PER SIMPLE IRA plan” so for someone with multiple SIMPLE IRA employers their aggregate deferral cannot exceed 12k per plan or 17k over all their SIMPLE plans.

Submitted by robert levine on Wed, 2015-12-23 16:15

 I had a question regarding the post you answered several years ago (see below.) I have a client that is employed by two firms (her firm as well as her husband’s unrelated businesses.)  Both companies have a SIMPLE IRA.  I told the client to confirm with her CPA, however, I thought that the 402 (g) limit applies and that she could contribute max $12,500 to one plan and a total of $18k for both FOR 2015.  Additionally she should be able to contribute $3,000 since she is over 50.      Can you point me where in the code it indicates that she can contribute more than $15,500 total? I looked on the IRS site and it is a bit ambivalent.  They discuss participants that are in 401k and Simple but not 2 Simple IRA’s.   Any assistance would be greatly appreciated!  I want to make sure I provide accurate information to the client. 

Submitted by Alan - IRA critic on Wed, 2015-12-23 20:34

That would be Sec 402(g)(3)(D), which indicates that Sec 408(p) SIMPLE IRA contributions are subject to the 402g limit (18k at this time). The 3k catchup would be in addition to that.

(3) Elective deferralsFor purposes of this subsection, the term “elective deferrals” means, with respect to any taxable year, the sum of—(A)any employer contribution under a qualified cash or deferred arrangement (as defined in section 401(k)) to the extent not includible in gross income for the taxable year under subsection (e)(3) (determined without regard to this subsection),(B)any employer contribution to the extent not includible in gross income for the taxable year under subsection (h)(1)(B) (determined without regard to this subsection),(C)any employer contribution to purchase an annuity contract under section 403(b) under a salary reduction agreement (within the meaning of section 3121(a)(5)(D)), and(D)any elective employer contribution under section 408(p)(2)(A)(i).An employer contribution shall not be treated as an elective deferral described in subparagraph (C) if under the salary reduction agreement such contribution is made pursuant to a one-time irrevocable election made by the employee at the time of initial eligibility to participate in the agreement or is made pursuant to a similar arrangement involving a one-time irrevocable election specified in regulations.

Submitted by David Mertz on Wed, 2015-12-23 21:09

Section 402(g)(3)(D) doesn’t quite say that elective deferrals to multiple SIMPLE IRA plans of unrelated employers are not separately aggregated when considering the SIMPLE IRA limits.  For that one must go to 408(p)(2)(A) where it refers to “an employee” and “the employer”, rather than to an “individual”, making the SIMPLE IRA section 408(p)(2)(E) elective deferral limit a per-plan limit.

Submitted by Alan - IRA critic on Wed, 2015-12-23 21:25

It is probably simpler to summarize this by stating that:

  1.   Any one SIMPLE IRA is subject to the 12,500 SIMPLE IRA salary reduction contribution maximum

2)   With multiple SIMPLE IRA accounts, the total of such contributions cannot exceed the elective deferral limit of 18k.

Submitted by robert levine on Wed, 2015-12-23 22:53

I found this thread (see below) that seems to conflict with your view.  However, not sure if it is accurate. Application of 402(g) limit for plans maintained by related or unrelated employers If an employee participates in more than one company sponsored deferral plan the employee cannot defer more than the deferral limit of the lowest deferral limit plan. The deferrals in a 457 plan are not aggregated with other deferrals for the purposes of this limit.  Example 1) A 40-year-old employee works for company A which maintains a 401(k) plan and for company B which maintains a SIMPLE 401(k). The most the employee can defer in the aggregate is $18,000.  Example 2) A 40-year-old employee works for company A which maintains a SIMPLE IRA plan and for company B which maintains a SIMPLE 401(k). The most the employee can defer in the aggregate is $12,500.    

Submitted by robert levine on Wed, 2015-12-23 22:55

Can you point me to regulations that indicate an elective deferal  limit of $18k.  The client’s CPA is sure that $15,500 is max. The link below is the source of my previous post.   Any help would be greatly appreciated! MANY THANKS!http://financialplanningbodyofknowledge.com/wiki/Multiple_plans

Submitted by David Mertz on Thu, 2015-12-24 03:28

From irs.gov, How Much Salary Can You Defer if You’re Eligible for More than One Retirement Plan

Elective deferral limitThe amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan’s terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans.

(This is before factoring in the catch-up.)

Submitted by William Tuttle on Sat, 2015-12-26 15:18

The client’s CPA is incorrect as well as the reference provided. When you want clarity your should always go directly to the IRC, CFR, IRS notices, revenue rulings, website, etc… The internet is full of incorect information by third parties.Alan has given you the 402(g) reference and DMx has given you the IRS’s plain language reference. Ask the CPA to provide any authoratative reference that the lower limit applies. If you want to see a specific refence that the 402(g) limit apllies to SIMPLE IRA plans, see IRS Notice 98-4 SIMPLE IRA Plan Guidance Q&A C-3.

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