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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.
Next:
SIMPLE Plans: Maximum Compensation Used for Figuring Contribution Limits; Time Limit for Employer to Deposit Salary Reduction Contributions
Related Links
- What is a SIMPLE Plan?
- Who Can Participate in a SIMPLE Plan?
- Setting Up a SIMPLE Plan
- SIMPE IRAs
- Eligible Employees
- When to Set Up a SIMPLE Plan
- SIMPLE Plan Salary Reduction Contribution Limits
- Who Contributes to a SIMPLE IRA?
- Matching and Nonelective Contributions
- Choosing a Lower Matching Percentage
- Form W-2 Reporting for SIMPLE IRA Contributions
- Deducting Matching and Nonelective Contributions
- Timing Deductions for Contributions
- Two Ways To Set Up a SIMPLE Plan
- After the SIMPLE Plan is Set Up
- What is an Eligible Employee?
- What is an Excludible Employee?
- When To Set Up a SIMPLE IRA Plan
- Notification Requirement
- Election Period
- SIMPLE 401 (k) Plans
- Distributions, Rollovers, and Withdrawals
- Credit for Small Employer Pension Plan Startup Costs
- Credit for Qualified Retirement Savings Contributions
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