SIMPLE IRA Contributions – withheld or remitted?

Submitted by Nathan Kastner on Wed, 2023-08-16 20:31

Employer withholds $10k from an employee’s paycheck from July 2022 through December 2022. Employer SHOULD be remitting these sums to the SIMPLE IRA custodian on a monthly basis. They, however, fail to do so. On January 17 2023, employer remits the full $10k to the SIMPLE IRA. When considering the 2023 maximum salary deferral limits, does that $10k count against the 2023 limit? Thanks,



Submitted by Alan - IRA critic on Wed, 2023-08-16 20:42

It should be reflected by the Box 12 Code S amount on your 2022 W-2.   Was it?

Submitted by Nathan Kastner on Wed, 2023-08-16 20:48

Thanks for the prompt response. Unfortunately, I don’t know. I’m not the employee. This particular employee has either contributed $15,300 in 2023 or $5,300. We’re afraid he’s gonna hit the annual limits if that “2022 money” got counted as 2023 deferrals. Just wasn’t sure the IRS stance on this sorta situation. 

Submitted by Alan - IRA critic on Wed, 2023-08-16 20:59

  • The IRS will be guided by the W-2, so he needs to check his 2022 W-2 to determine if it reflects all his 2022 SIMPLE IRA contributions. Even if the W-2 is correct, the employer has violated the contribution timing requirements. See G-5 of Notice 98-4 below:
  • “Q. G5: When must an employer make salary reduction contributions under a SIMPLE IRA Plan?  A. G5: The employer must make salary reduction contributions to the financial institution maintaining the SIMPLE IRA no later than the close of the 30day period following the last day of the month in which amounts would otherwise have been payable to the employee in cash. The Department of Labor has indicated that most SIMPLE IRA Plans are also subject to Title I of ERISA, and under Department of Labor regulations, at 29 CFR 2510.3-102, salary reduction contributions to these plans must be made to the SIMPLE IRA as of the earliest date on which the contributions can reasonably be segregated from the employer’s general assets, but in no event later than the 30day deadline described above.”

Submitted by Nathan Kastner on Wed, 2023-08-16 21:10

Thanks again. The employer has unquestionably violated the contribution timing requirements. That much is an undisputed fact that even the employer acknolwedges. I wish I could say that this was an isolated incident, but it is not.

Submitted by Alan - IRA critic on Wed, 2023-08-16 22:02

Submitted by David Mertz on Thu, 2023-08-17 00:10

  • Since the $10k was withheld from 2022 pay, it would seem to be impossible for the employer to legitimately report this amount in any way other than with code S in box 12 of the employee’s 2022 Form W-2.  Any reporting other than that would need to be corrected.
  • With the late deposit, the fix-it guide indicates that the employer also needs to make an additional contribution of the earnings that the contributions would’ve accrued if they were timely contributed.  This additional amount would not be considered to be elective deferrals by the employee and would not be included in the amount reported with code S.  The online calculator suggests that the additional amount would be something on the order of $300.

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