Simple IRA at New Job – Help

Just got this e-mail form the #2 daughter who just changed jobs and the new company has a “Simple IRA” which I have never heard of before.

She worked for a 401k company (lincare) for the first 9 months of 2015 and probably contributed $15,000 so does this mean she can’t contribute the $12,500 to the new company Simple IRA? Or is there a loop hole her she can exploit and put $12,500 in the Simple IRA too? Of course she has 2 weeks to figure this out.

The old 401k is still sitting with the old custodian aka Wells Fargo and is worth about $75,000 I will probably move it to TDAmeritrade as a Roll Over IRA at sometime in the future as the investment options in the Wells Fargo 401k suck.

Dad

Hi Dad-

So after talking with my co-workers, they say the company’s investment program is called a Simple IRA (not a 401k). I have researched it a little bit, looks like the max is $12,500.

Honey Bear Tree Fruit matches 3%.
Looks like I need to make my first contribution this first pay check if I am enrolled in the program. DAD-WHAT IS YOUR OPINION ON A SIMPLE IRA?

https://newdirectionira.com/simple-ira.php

Open Deadline: Oct 1st of current year
Employee Fund Deadline: Defer from last paycheck or Dec 31
Employer Fund Deadline: Extended due date of return

Year

Maximum Contribution $12,500
(if under age 50)

Maximum Contribution $15,500
(if over age 50)

Contribution Deadline

SIMPLE IRAs must be established by October 1.



Both the SIMPLE IRA and the 401k are subject to the same elective deferral limit of 18,000 (under age 50). Therefore, her SIMPLE IRA contributions are limited to 3,000 (actually the 18,000 less the amount deferred to the 401k so she needs to know that exact amount).



Thanks Alan,1) I am working on getting that exact 401k contribution dollar amount year to date from her.2) The info above she provided me from her new employer (Honey Bear Tree Fruit) states the Maximum Contribution is $12,500 if under 50, which she is.  So are they wrong and the correct number is $18,000 for 2015 as you state?  Or have they restricted in some way to lower? 



Put another way, if she only contributed to the 401k plan, the elective deferral limit is 18,000. If she only contributed to the SIMPLE IRA plan, the limit for that plan is 12,500. However, these separate limits are also subject to an aggregate limit of 18,000 in total. She can split that 18,000 total limit anyway she wants between the two plans as long as she does not exceed the 12,500 for the SIMPLE IRA itself. In her case, there is no decision to be made with regard to how to best apply the 18,000 limit because the 401k contributions are already over with with approximately 15,000 contributed. That leaves only 3,000 left of the overall 18,000 limit, so she cannot contribute more than 3,000 to the SIMPLE. Next year when she only contributes to the SIMPLE IRA, she can max out the SIMPLE at 12,500.

  • Pub 560 covers SIMPLE IRAs and the following is copied from that Publication:  If you or an employee participates in any other qualified plan during the year and you or your employee have salary reduction contributions (elective deferrals) under those plans, the salary reduction contributions under a SIMPLE IRA plan also count toward the overall annual limit ($17,500 for 2014 and $18,000 for 2015) on exclusion of salary reduction contributions and other elective deferrals.

 



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