Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Limit on Elective Deferrals for 401(k) Plans
SIMPLE IRA Contributions
The only contributions that may be made to a SIMPLE IRA are elective salary-reduction contributions by employees and matching or non-elective contributions by employers. All contributions are fully vested and nonforfeitable when made.
An employee may make salary-reduction contributions up to the annual SIMPLE IRA limit regardless of compensation. Salary-reduction contributions are excluded from the employee's taxable wages on Form W-2 and not subject to federal tax withholding, however, they are subject to Social Security and Medicare tax withholding.
Eligible employees must be given notice by their employer of their right to elect salary-reduction contributions and at least 60 days to make the election. If the employer uses model IRS Form 5304-SIMPLE or 5305-SIMPLE, a notification document is included.
Keep in mind, if you contribute to a SIMPLE IRA and to a 401(k) plan, 403(b) or salary-reduction SEP of another employer for the same year, the salary-reduction contributions to the SIMPE IRA count toward the overall annual limit of tax-free salary-reduction deferrals. Deferrals over the annual limit are taxable and must be removed to avoid being taxed again when distributed from the plan.
2023 Elective Deferral Limits
- 401(k), 403(b), 457 plans: $22,500
- Salary-reduction SEP: $22,500
- SIMPLE IRA: $15,500
- Additional contribution if age 50 or older ("catch-up" contributions):
- 401(k), 403(b), government 457 and SEP plans: $7,500
- SIMPLE IRA: $3,500
SIMPLE IRA Employer Contributions
An employer must decide whether to make either a matching contribution or a fixed non-elective contribution. If an employer elects to make matching contributions, the employer generally must match the employee's salary-reduction contribution up to a limit of 3% of the employee's compensation. For up to two years in any five-year period, the 3% matching limit may be reduced to as low a 1% for each eligible employee.
Instead of the 3% or reduced limit matching contribution, the employer may choose to make a non-elective contribution equal to 2% of each eligible employee's compensation. The 2% non-elective contribution is subject to an annual compensation limit, which for 2023 is $330,000. Therefore, for 2023, the maximum 2% non-elective contribution is $6,600 (2% x $330,000) even if an employee earned more than $330,000.
Note that the 3% matching contribution of any employee's salary-reduction contribution is not subject to the annual compensation limit, but only to the annual salary-reduction limit, which is $15,500 or $19,000 for a plan participant age 50 or over.
Form W-2 Reporting for Elective Deferrals
Employee's elective deferrals are excluded from federal income taxes. Do not include them in box 1 of Form W-2. However, elective deferrals are subject to social security and Medicare taxes, so you must include them in boxes 3 and 5, and complete box 12 of Form W-2.
Automatic Enrollment in a 401(k) Plan
An employer's 401(k) plan can have an automatic enrollment feature. This feature allows an employer to automatically reduce an employee's pay by a fixed percentage and contribute that amount to the 401(k) plan on his or her behalf unless the employee affirmatively chooses not to have his or her pay reduced or chooses to have it reduced by a different percentage. These contributions qualify as elective deferrals.