Contributing to a SIMPLE IRA FAQs

Contributing to a SIMPLE IRA

A Security Benefit SIMPLE IRA offers you turnkey sales support to reduce your administrative workload, while providing your small business clients an easy way to provide a retirement plan for their employees. Not only are SIMPLE IRAs, well simple, they are inexpensive and straightforward to set up.

  • No cost to establish
  • No government forms to file
  • No annual reporting
  • No non-discrimination testing
  • Pretax salary deferrals 
  • Minimal employer involvement

Below are some frequently asked questions. You can find more on SIMPLE IRA FAQs Overview, Establishing a SIMPLE IRA, and Rollovers and Distributions. Visit our SIMPLE IRA page to learn more about the Security Benefit SIMPLE IRA.

What compensation/income is used (by entity type) for contribution purposes for a SIMPLE IRA plan?

For those not self-employed:

  • Wages, tips, and other compensation from the employer subject to income tax withholding,
  • Amounts described in Internal Revenue Code Section 6051(a)(8), including elective contributions made under a SIMPLE IRA plan, and
  • Compensation deferred under a 457 plan.
Are contributions tax deductible to a SIMPLE IRA plan?

Yes.

Are Roth contributions available in SIMPLE IRA plans?

Yes, the SECURE 2.0 Act authorized employee Roth contributions to SIMPLE IRA plans for years 2023 and later. This is currently pending an IRS revision of Form 5304-SIMPLE.

How much can be contributed each year to SIMPLE IRA plans?

Each year, the IRS issues new contribution limits. To learn more about this year's salary deferral limits, visit our Tax Center.

What types of contributions can be made to a SIMPLE IRA plan?

Pretax deferrals/contributions, after tax Roth contributions, and employer matching or non-elective contributions. 

What methods are available to remit contributions for a SIMPLE IRA plan?

Contributions can be made via check, ACH/wire, or online via www.SecurityBenefit.com. 

Are catch-up contributions available to a SIMPLE IRA plan?

Yes, catch-up contributions are allowed for those age 50 or older.

Can contributions be made after the participant in the SIMPLE IRA plan is past the required minimum distribution age?

Yes.

Can contributions be made to a SEP IRA and a SIMPLE IRA plan in the same year?

No.

Can employee contributions be made after the end of the calendar year to a SIMPLE IRA plan?

No.

Can employer contributions be made after the end of the year to a SIMPLE IRA plan?

Yes, employer contributions can be made up to the tax filing deadline including extensions. 

What type of contributions must the employer make to the plan?
  • The employer has the option of making a mandatory matching contribution of 100% up to 3% of compensation to participating employees OR an employer non-elective contribution of 2% of compensation to all eligible employees.
  • The mandatory matching contribution of 3% can be reduced to between 1% and 3% of compensation in 2 out of 5 plan years.
  • Each year, the employer may choose whether they will make the matching contribution or the non-elective contribution via the model notification.
  • The employer must provide notification each year before the employee’s 60-day election period for the calendar year. 
Can an employer stop contributions to the plan?

No, the employer may switch between the matching and non-elective contribution each year but must always provide a contribution. 

Can an employer reduce contributions to the plan?

Yes, the mandatory matching contribution of 3% can be reduced to between 1% and 3% of compensation in 2 out of 5 plan years. 

What notification requirements apply to employers?

An employer must notify each employee before the employee’s 60-day election period of the employee’s opportunity to enter into a salary reduction agreement, to modify a prior agreement or to change or select a financial institution that will serve as trustee, custodian, or issuer of the employee’s SIMPLE IRA.

An employer must provide each employee with a summary description of the plan. Copies of the IRS form 5304-SIMPLE, including instructions, will satisfy this requirement.

An employer must also provide notification to the employees (via the model notification that is part of the 5304-SIMPLE form) indicating whether the employer will provide:

  • A matching contribution equal to the employees’ salary reduction contributions up to a limit of 3% of compensation. 
  • A matching contribution equal to the employees’ salary reduction contributions subject to a percentage limit that is between 1% and 3% of compensation. This reduced matching contribution option can only be used in 2 out of 5 plan years. 
  • A non-elective contribution equal to 2% of compensation.

Important Note: The model notification on page 3 of Form 5304-SIMPLE can be used to satisfy this requirement.


FINANCIAL PROFESSIONAL USE ONLY — NOT FOR USE WITH CONSUMERS

Security Benefit, its affiliates and subsidiaries, and their respective employees and representatives, do not provide tax, accounting, or legal advice. Any statements contained herein concerning taxes were not intended as and should not be construed as tax advice, nor should they be used for the purpose of avoiding federal, state, or local taxes and/or tax penalties. Please seek independent tax, accounting, or legal advice. 

Services are offered through Security Distributors, a subsidiary of Security Benefit Corporation (Security Benefit).
 

SB-10042-14 | 2023-12-05