SIMPLE Plan Nonelective Contributions

Instead of making matching contributions, an employer may choose to make nonelective (mandatory) contributions to an employees SIMPLE IRA.

1) Matching and nonelective contributions:

  • Are not included in income.
  • Are not subject to:
    • Federal income taxes
    • Social security and Medicare taxes, or
    • Federal unemployment taxes (FUTA)

Self-employed persons:

For retirement plan purposes a self-employed person is considered:

  • An employee and
  • an employer

Therefore, you're allowed to make two separate contributions for yourself:

  • One as an employee
  • Another as an employer

How Much Can a Nonelective Contribution Be?

The employer can choose to make nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 (or some lower amount the employer selects) of compensation from the employer for the year.

If you choose to make nonelective contributions, you must make the contributions whether or not the employee chooses to make salary reduction contributions.

File your personal and small business taxes (Schedule C)