Happy tax planning season all.

We had a company Treasurer ask us about a communication they received from Gusto regarding matching contributions for a new eligible employee participant in their SRA.

The language of Gusto’s comm said the following:

“Q: What causes an employer contribution catch-up?
A: A catch-up happens if an employee did not have deductions on a payroll but has already contributed 3% of their year-to-date wages. The system calculates employer contributions based on the full year’s wages, not just one payroll.”

The Gusto notice also referred to this as an IRS rule change for SIMPLE’s.

We told the client we’d research and get back, but our initial inclination was that the employer would contribute up to 3% of the employee’s salary ONLY if they contribute 3% of their annual salary (even if they do so in the final month or two of the year).

Our initial read of IRS rules makes it look like nothing has changed.

Has anyone else encountered this?

Thanks in advance for any insight.

Brendan