2025 Defined Contribution Limits
For the year 2025, the Annual Defined Contribution limit is $70,000. If a client is contributing to two SIMPLE IRA plans, can they contribute up to the 2025 maximum of $40,000 with Catch-up contributions?
For the year 2025, the Annual Defined Contribution limit is $70,000. If a client is contributing to two SIMPLE IRA plans, can they contribute up to the 2025 maximum of $40,000 with Catch-up contributions?
Permalink Submitted by Alan - IRA critic on Fri, 2025-01-10 11:43
No, the salary reduction limit applies per participant, not per plan. Therefore, the plan with the highest matching contribution limit and/or lowest costs should be prioritized.
Permalink Submitted by Denise Sowell on Fri, 2025-01-10 12:30
If the client had contributed too much to a SIMPLE IRA in 2024, what would be the correct way to remedy this mistake?
Permalink Submitted by Denise Sowell on Sat, 2025-01-11 10:56
Alan, I want to clarify my question. If a client is a participant in two SIMPLE IRAs, can he contribute the maximum allowed to both plans as long as the total of the two plans does not exceed the $70,000 maximum 2025 defined contribution limit?
Thank you,
Denise Sowell
Permalink Submitted by Alan - IRA critic on Sat, 2025-01-11 13:31
The 70,000 overall limit applies to qualified plans and SEP IRAs, but not to SIMPLE IRAs.
The SIMPLE IRA salary reduction contribution limit for 2024 and 2025 is 17,600 for plans under 26 employees (not including catch ups), regardless of eligibility to contribute to more than one SIMPLE IRA because these limits apply per employee, not per plan.
If there have been excess contributions made, they can be returned by the due date plus extensions in the same manner as traditional IRAs.
Permalink Submitted by Denise Sowell on Mon, 2025-01-13 07:22
My client found this on the internet…… If you also contribute to another employer-sponsored retirement plan for another job, such as a 401(k) or 403(b), the total you can save as an employee across all of those plans, including SIMPLE IRAs, is $23,500 if you are under age 50, $31,000 if you are between age 50 and 59 or age 64 or older, or $34,750 if you are age 60 to 63.
Based on your comments this is incorrect. Please advise.
Thank you!
Permalink Submitted by Alan - IRA critic on Mon, 2025-01-13 11:57
That is correct but does not conflict with my post. Your question addressed multiple SIMPLE IRAs, but not any 401k or 403b plans.
In other words, if a taxpayer participates in both a SIMPLE IRA and a 401k, there is a limit of 17,600 for the SIMPLE IRA and 23,500 for the 401k, but the total is restricted to 23,500. If the SIMPLE was maxed out at 17,600 it would only leave 5,900 for the 401k. If the 401k was maxed at 23,500 then the SIMPLE could not receive any contributions.
Permalink Submitted by Denise Sowell on Mon, 2025-01-13 16:14
Thank you so much for this clarification. I feel much more confident of the correct response to give my client.