SIMPLE IRA Employer Match

Submitted by Kirk Halveland on Fri, 2022-07-29 16:39

Current employee is wanting to discontinue their employer sponsored SIMPLE IRA now. The employer still owes the employee the matching deposit, which is pro-rated to how many months the employee participated in the SIMPLE IRA. I’m thinking this all is fact but please correct me if I am mistaken on any of the prior.
Question is, can the employer deposit the pro-rated match into the employees account now or do they have to wait until they do all employee matches at the end of the year? The employee is wanting to withdraw all funds and close their SIMPLE IRA.
Sorry for the long explanation. This is one I’ve never had before. Any suggestion would be greatly appreciated!
Kirk



Submitted by David Mertz on Fri, 2022-07-29 18:18

  • There is no pro-rating based on the number of months of participation.  The required match is a dollar-for-dollar match of the employee’s salary reduction contributions up to 3% of the entire year’s compensation.
  • Matching contributions can be made on a per-pay-period basis or by the due date of the employer’s tax return, including extensions.  The SIMPLE IRA needs to remain open until the required employer contribution is made even if other funds are distributed.  If the employee contributions are presently more than 3% of compensation to date, that would mean leaving it open at least until additional compensation earned throughout the year results in the percentage of employee contributions being 3% or less of compensation and the employer match is determined and can be made.
  • https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-simple-ira-plans


Submitted by William Tuttle on Fri, 2022-07-29 18:33

  • An employee must remain a participant in an active Simple IRA plan while employed.
  • However, they can elect to stop employee deferrals at any time.
  • Employer matches are not prorated by month. They must be a 100% match of the employee’s deferrals up to a percentage (usually 3%) of the employee’s compensation.
  • Any employer matches must be deposited in a non-discriminatory manner. I.e. They must be deposited in the same manner and timing as all other employees.
  • An employee owns their employee deferrals and employer matches as soon as deposited. They can withdraw and rollover assets at any time.
  • Any SIMPLE IRA withdrawals before two (2) years have lapse from the first contribution are subject to a 25% early withdrawal penalty.
  • SIMPLE IRA assets can only be rolled over to another SIMPLE IRA during that same two (2) year period. After that the assets can be rolled over to any eligible retirement account.
  • Any withdrawals prior to age 59 1/2 are subject to a 10% early withdrawal penalty.


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