Simple IRA Maximum (3% ER + EE)

Submitted by brcwm on Tue, 2023-02-28 19:42

What is the absolute maximum that can be put into a Simple IRA (employer and employee) assuming the employer is doing the 3% non-elective matching.

Employee would be $15,500 plus $3,500 catch up. Then, where does the 3% top out at? I guess it’s just compensation that equals to $15,500 then? So, $15,500 divided by .03 which is $516k? Thanks!



Submitted by David Mertz on Tue, 2023-02-28 21:55

  • “Non-elective” and “matching” are mutually exclusive so it’s not clear which one is being done.
  • A maximum of $330,000 of compensation is used when calculating the non-elective employer contribution for 2023, so non-elective employer contributions would be 2% of a maximum of $330,000 of the employee’s compensation.   $330,000 or more of compensation would result in the maximum employer contribution of $6,600 for 2023 no matter how much the employee contributes.
  • Matching contributions are a dollar-for-dollar match but limited to 3% of the employee’s compensation [no compensation limit].

Submitted by Alan - IRA critic on Tue, 2023-02-28 22:57

Matching contributions are not subject to the 330k compensation limit of non elective contributions. The matching contribution is the lesser of 3% of compensation or the employee’s total salary reduction contributions including catch ups. For an ee with 100k of comp the match would be 3k plus 19k of salary reduction = 22k. It would take compensation of 633k to generate a match of 19k which means the absolute total contribution possible to a plan would be 38k (19 salary reduction + 19 match).

Submitted by David Mertz on Wed, 2023-03-01 02:17

Ah, you are right.  It’s only the 2% non-elective employer contribution that is subject to the $330,000 compensation limit.  I’ve made the correction.

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