SIMPLE IRA matching reduction
I’m aware that employers who are doing the elective matching can reduce the 3% match down to 1% for 2 out of 5 years. How does that work over multiple 5 year periods of time though? Say in years 1-3 the employer did 3% and in years 4 and 5 employer did 1%. Can the employer continue to do 1% in years 6 and 7 provided they do 3% in years 8-10?
Permalink Submitted by Alan - IRA critic on Tue, 2013-10-01 21:25
Per IRS Notice 98-4, the 5 year period ends with the year for which the election is being made. With reference to your question, the employer could not use 1% in years 6 and 7 since years 4 and 5 would be included in the 5 year period ending with years 6 or 7. They could next use 1% in Year 9 (5-9 is the 5 year period and 1% would apply to 5 and 9).