Options for employer on Simple IRA contributions

Submitted by Amanda Minter on Wed, 2020-06-17 18:15

I have a small employer in the natural gas industry and they have a SIMPLE IRA with me. COVID has put a financial squeeze on their business and they are curious if there’s and option out there for them to put a pause on the matching contributions.

I read somewhere that employer contributions had to be in before the tax deadline so I was going to make the suggestion to the employer to defer the matching contributions until the tax deadline if this is the case.

Are there any other options the employer has to put a pause on the matching contributions?



Submitted by William Tuttle on Wed, 2020-06-17 19:54

  • A SIMPLE IRA must be for an entire calendar year.
  • Employer contributions are mandatory for the entire calendar year.
  • The employer has until the employer’s tax filing deadline including extensions to make employer contributions.
  • An employer can reduce the employer match to as low as 1% in two (2) out of every five (5) years. However, for 2021 they would have to notify employees of the reduced limit within a reasonable time before the 2021 60-day election period (11/02/2020 – 12/31/2020) during which employees can enter into salary reduction agreements for the 2021 calendar year.

Bottom Line: They can not make any changes for this calendar year, but they have until the 2019 businesses tax filing deadline including extensions in 2020 to make 2019 employer contributions and will also have until the 2020 businesses tax filing deadline including extensions in 2021 to make 2020 employer contributions.

Submitted by Alan - IRA critic on Wed, 2020-06-17 20:08

There is no Covid relief for making the matching contributions to a SIMPLE IRA. However, these contributions are not required until the due date plus extensions of the tax return, so that may provide a delay if these contributions were made earlier in the past. It is also possible to reduce the rate for next year in the annual Notice required by 11/2.

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