SIMPLE IRA Contribution Limitation

Submitted by Eric H Silverman on Wed, 2015-04-08 01:48

Is there a dollar maximum contribution to a SIMPLE IRA for a self-employed person? The maximum salary deferral for 2015 is $12,500 for a person under age 50. The $265,000 salary cap does NOT apply if the 3% matching contribution is used. Suppose that a self-employed person’s compensation, after deduction of half of the self-employment tax and the 3/103 deduction of the employer contribution is $2,000,000. Is he permitted to contribute $12,500, plus 3% of $2,000,000, which is equal to $72,500? Is his deduction capped by the $53,000 limitation for defined contribution plans?

Is there a $25,000 limitation? The bankrate.com online calculator shows a maximum of $25,000, along with the correct maximums of $53,000 for a SEP IRA, 401(k) plan and profit sharing plan. Furthermore, it applies the $265,000 salary cap to the SIMPLE IRA, as well as to the plans to which it applies.



Submitted by Alan - IRA critic on Wed, 2015-04-08 02:51

  1. With respect to the 3% matching contribution, the match is a dollar for dollar amount up to the 12,500 deferral limit with an additional cap of 3% of salary. Therefore, no matter how high the  salary goes, the match cannot exceed 12,500, which must be what bankrate is referring to with their 25,000 limit. However, there is also a catch up contribution of 3,000 available, which would bring the max total to 28,000.
  2. Alternatively, if the employer chooses the 2% non elective contribution, this is limited to a salary cap of 265,000 or 5,300 in addition to the 12,500 deferred. Non elective total max with catchup would be 20,800.
  3. 415(c) annual addition limit does not apply to SIMPLE IRAs, but there is no way a SIMPLE can approach the 53,000 415(c) limit anyway.


Submitted by Eric H Silverman on Mon, 2015-04-20 05:31

I am impressed by the number of your posts here and their quality.



Submitted by John Peterson on Wed, 2015-04-08 22:13

In answer 1 wouldn’t the maximum combined contribution with a catch-up eligible participant be $31,000 (not $28,000)?



Submitted by Alan - IRA critic on Wed, 2015-04-08 23:25

Of course. I forgot to add the match on the catchup. 12,500 plus 3000 = 15,500 plus 15,500 matching equals 31,000.



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