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401(a)(17) comp limit as it applies to SIMPLE IRA's


Beltane
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Sponsors of SIMPLE IRA's must either make a matching contribution or a 2% nonelective contribution on behalf of all eligible participants.

IRC 408(p)(2)(B)(ii) caps considered compensation for the 2% nonelective at $220,000 [for 2006].

The matching contribution is anywhere from 1% to 3% [the 'applicable percentage] of total gross compensation for those who contribute. It doesn't look like the 401(a)(17) cap applies when computing the match amount, as opposed to computing the non elective amount. Is this correct?

So, if an owner had gross comp of $ 300,000, a nonelective contribution of 2% would limit the [2006] contribution to 2% of 220,000, or $4,400. But if the 3% match was applicable for the year, the matching

contribution, if the above thinking is correct, would be 3% of $300,000, or $9,000.

??

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Sponsors of SIMPLE IRA's must either make a matching contribution or a 2% nonelective contribution on behalf of all eligible participants.

IRC 408(p)(2)(B)(ii) caps considered compensation for the 2% nonelective at $220,000 [for 2006].

The matching contribution is anywhere from 1% to 3% [the 'applicable percentage] of total gross compensation for those who contribute. It doesn't look like the 401(a)(17) cap applies when computing the match amount, as opposed to computing the non elective amount. Is this correct?

So, if an owner had gross comp of $ 300,000, a nonelective contribution of 2% would limit the [2006] contribution to 2% of 220,000, or $4,400. But if the 3% match was applicable for the year, the matching

contribution, if the above thinking is correct, would be 3% of $300,000, or $9,000.

??

You are right. The Compensation cap does not apply to matching contributions for a SIMPLE IRA, thus allowing the individual in your example to rec a match cont of $9,000, providing the amount of deferral contribution is at least $9,000

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

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