SIMPLE IRA – Contribution Limits and Qualifications
We are looking to start a SIMPLE IRA plan for a client of ours who owns a small business. The business employs 4 or 5 full-time employees and 1 or 2 part-time employees. From what I have researched online, here is what I have found in terms of contribution limits to the plan (please correct me if I’m wrong about any of these figures).
- Standard SIMPLE IRA Contribution Limits for 2025.
- Employee Deferral: $16,500
- Catch-Up Contribution (Ages 50-59, Ages 64+): $3,500
- Super Catch-Up Contribution (Ages 60-63): $3,500 + $1,750 = $5,250
- Employee Deferral: $16,500
- “Certain SIMPLE IRA Plans” Contribution Limits for 2025.
- Employee Deferral: $17,600
- Catch-Up Contribution (Ages 50-59, Ages 64+): $3,850
- Super Catch-Up Contribution (Ages 60-63): $3,850 + $1,925 = $5,775
- Employee Deferral: $17,600
From those figures, I did have a few questions. If I could please get ANSWERS & SOURCES (IRS Regs), that would be great!
- What qualifies as a “Certain SIMPLE IRA Plan”? I believe it is 25 or fewer employees, but want to confirm.
- What is the formula for calculating the super catch-up contributions for both classes of SIMPLE IRAs? I believe it is the greater of $5,000 or 150% of the normal catch-up contribution amount (for each class), but want to confirm.
- What is the formula for calculating the regular catch-up amount (Ages 50-59, Ages 64+) for both classes of SIMPLE IRAs.
- What is the formula for calculating the max employee deferral amount for both classes of SIMPLE IRAs.
Thank You!
Permalink Submitted by Alan - IRA critic on Thu, 2025-04-24 11:42
Last time this question came up on the bogleheads site, it could not be determined how the IRS applied the inflation adjustments. If you go to the Slott report under “Resources” on the right side, then go to p 7 of the report and look for an article titled “Nothing Simple About It” which will contain the 2025 limits. Those limits agree with your first 5 figures, but not the last figure, which remains at 5250.
“Certain plans” are those with 25 or fewer employees.
The confusing portion is how the inflation adjustment that would be expected for 2025, was reduced because the arbitrary 10% increase under Secure 2.0 at the height of inflation turned out to be too high and had to be corrected by reducing the inflation adjustment for 2025. The IRS has not explained how this was done, they just published the 2025 limits per their math.