2017 and 2016 Simple IRA Contribution and Income Limits – Small Business Retirement Plans

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A SIMPLE IRA is also a small business IRA-based plan with a simplified method for employers to make direct contributions (via salary reductions) toward their employees’ retirement and their own retirement. Employees may choose (not mandatory) to make regular contributions and the employer makes matching or non-elective contributions. No other contributions may be made under a SIMPLE IRA plan and any contributions made to a SEP IRA plan can not be repurposed to another or traditional IRA plan.

SIMPLE IRAs are ideally suited as a start-up retirement savings plan for small employers who do not currently sponsor a 401k retirement or SEP IRA plan. The main advantage of a Simple IRA to other tax advantaged retirement plans is the much lower administration costs. In order to establish a SIMPLE IRA, the business must have 100 or fewer employees and it also cannot have any other type of retirement plan in place.

Contribution Limits: The latest annual employee deferral amount per the IRS is $12,500 for 2017, unchanged from 2016. Employees over age 50 allowed to make a catch-up contribution of up to $3,000. Contributions under a SIMPLE IRA plan that count toward the overall annual limit on elective deferrals an employee may make to tax advantaged retirement plans.

Employers are generally required to match each employee’s salary reduction contribution on a dollar-for-dollar basis up to 3% of the employee’s compensation. Or if no matching is in place, an employer can make non-elective contributions of 2% of the employee’s compensation up to the annual limit of $270,000 for 2017 ($265,000 for 2016). If an employer chooses to make non-elective contributions, they must make them for all eligible employees whether or not they make salary reduction contributions.

The other very popular small business retirement plan is the SEP IRA. See this article for more details and the latest information on SEP IRA limits and eligibility.

Looking for options to open a low cost, easy to administer SEP IRA or Simple IRA for yourself and/or your employees? Then consider opening a no-fee SEP or Simple IRA retirement account with TD Ameritrade to reduce your taxable income and tax effectively build your retirement savings.  (Select the SEP IRA or Simple IRA account type)

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4 Comments on "2017 and 2016 Simple IRA Contribution and Income Limits – Small Business Retirement Plans"

Brian Ross

I have switched jobs mid year. My old employer had a 401K where I had invested $11,450 for the year. My new employer has a simple IRA where the max is $12,500+$2500 catch up. How much can I contribute to the new plan?

Thank you

Ted

My question is: I am a full time employee. I make my maximum contribution to 401K plan now. I get 5% employer matching contribution. I was thing to reduce my contribution with my employer enough to get their matching and contribute the rest to my other Indv. 401K outside of my employer’s. I do have side business that I bring in 1099 Misc. and was allowed to open a Solo 401k.
Can I do that?

Thanks in advance for your help.

You can do that, but what is the rationale behind that? Do you have better investment choices than your employer sponsored 401K? After all your 401K contributions are tax free at your employer and via your business. Do the math before making this change.

Solo and SEP IRA accounts have higher contribution limits, so they maybe a good option after you reach the limit at your employer.

[…] permit catch-up contributions up to $2,500 in 2011 and 2012. This is above the standard $11,500  contribution limit for SIMPLE IRA plans. You can also make catch-up contributions to your traditional or Roth IRA up to $1,000 in […]

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