A SEP and SIMPLE at the same time?
Let’s say a person has a SIMPLE IRA through their employer and is making maximum contributions. They also have income from an outside business. Can they open a SEP IRA and make contributions in the same year they maintain and contribute to the SIMPLE?
Also, could a person in this situation have a SIMPLE through their employer and a SIMPLE through their self employed outside business and make maximum contributions to both in the same tax year?
Permalink Submitted by Alan - IRA critic on Wed, 2015-04-01 21:11
Ifi the employers are unrelated, a SEP IRA could be used for the self employed business or another SIMPLE IRA. However, when SIMPLE IRAs are used for unrelated businesses, the total SIMPLE IRA salary reduction contribution is capped at the Sec 402g limit of 18k plus any catchup contribution.
Permalink Submitted by Jack Thomas on Wed, 2015-04-01 21:18
Great, thanks. Just to confirm: 18k total between the 2 SIMPLEs? Tax person recommending maxing out two SIMPLEs 18k each.
Permalink Submitted by Alan - IRA critic on Wed, 2015-04-01 22:48
A SIMPLE contribution is limited to 12,500 for 2015 per plan. But the 402g limit is 18k, so that effectively allows about a half contribution for the second SIMPLE IRA to bring the total to 18k.
Permalink Submitted by David Mertz on Thu, 2015-04-02 15:48
The $18k limit applies to the employee elective deferrals. It does not include the required employer matching or noneelective contribution that you would also make to a SIMPLE IRA from your self-employment income. Assuming $12,500 of elective deferrals to your other employer’s plan, your combined elective deferrals and employer contribution to the SIMPLE plan for your self-employment business could be more than $5,500, but with a maximum of $5,500 of elective deferrals. At some level of self-employment income, a SEP-IRA would allow a greater contribution (employer contribution only) than a SIMPLE IRA.