New SIMPLE IRA limits due to SECURE Act 2.0
Hi Everyone, Happy Friday! Just wondering why the new just published 2024 contribution limits don’t include the new SECURE Act limits for the SIMPLE IRA plans. I see all publications including the IRS newswire and they don’t mention anything. My understanding is there are new maximum contribution limits for SIMPLE IRA plans. Under the old law, the annual contribution limit would have been employee elective deferral contributions to a SIMPLE IRA plan at $16,000 (2024) and the catch-up contribution limit beginning at age 50 at $3,500. But SECURE 2.0 increased the annual deferral limit and the catch-up contribution at age 50 by 10%, in the case of an employer with no more than 25 employees. An employer with 26 to 100 employees would be permitted to provide higher deferral limits, but only if the employer either provides a 4% matching contribution or a 3% employer contribution.
Also there’s the optional additional non-elective contributions to SIMPLE IRA plans. Current law requires employers with SIMPLE IRA plans to make employer contributions to employees of either 2% of compensation or 3% of employee elective deferral contributions. SECURE 2.0 permits an employer to make additional contributions to each employee of the plan in a uniform manner, provided that the contribution may not exceed the lesser of up to 10% of compensation or $5,000 (indexed).
Am I missing something? Why is no one stating these new limits?
Permalink Submitted by Alan - IRA critic on Fri, 2023-11-03 17:09
There are probably multiple reasons for this including the staggering number of Secure Act 2.0 provisions, many poorly drafted, and some that were effective last January, just a couple weeks after the law passed. The IRS writes regulations at their own pace, often requesting input from stakeholders before proceeding. Roth SIMPLE IRAs were effective this year, but no one is providing them because the IRS has not acted yet. Presumably the IRS would factor in the effective year of each Secure provision, whether optional or mandatory, whether technical corrections from Congress are needed etc etc when determining their priority schedule to address the 90 plus provisions included in Secure. Therefore, Secure 2.0 included too many provisions with insufficient lead time to support implementation and too many overly technical details. Secure 1.0 preceded Secure 2.0 by 3 years, was much simpler with, and here we are 4 years later still waiting for the proposed Regs to be finalized. Roth catchup contributions (Sec 603 of Secure 2.0) was to be effective in 2024, but there are so many issues with it that the IRS has already delayed implementation 2 years to 2026. The entire legislative and implementation process is beset with timing issues that will result in delays in implementation and the IRS may want to avoid publicizing new limits until they can actually be implemented. Some provisions will be delayed by multiple years. Not only must the IRS provide guidance and publish forms, but custodians will have to re program their reporting systems, and provide educational guidance to employers and employees prior to implementation.
Permalink Submitted by Walter Gonzalez on Sun, 2023-11-05 13:17
Thanks!