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Simple: ER contribs and Comp


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Two questions I've been asked on a topic I rarely get involved in:

In either a SIMPLE IRA or SIMPLE 401k, are employer contributions (either match or ER nonelective) required when no HCE's (including owners) are deferring?

If the plan sponsor is a sole proprietor or partner in an LLC (i.e. income is not w-2) is there any restriction on their comp different from a qualified plan?

Thanks

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Two questions I've been asked on a topic I rarely get involved in:

In either a SIMPLE IRA or SIMPLE 401k, are employer contributions (either match or ER nonelective) required when no HCE's (including owners) are deferring?

Under both, the Employer Contributions are required and are not dependent on any HCE action.

If the plan sponsor is a sole proprietor or partner in an LLC (i.e. income is not w-2) is there any restriction on their comp different from a qualified plan?

Thanks

They'd used the earned income from self employment (net schedule C). We do know that for the SIMPLE IRA, the owner's earned income isn't reduced for the 'employer contribution' made to the account of that owner. For instance, in a qualified plan, if an owner with Net Schedule C income of $100K makes a 3K employer contribution to the plan, then his earned income will become $97K; making that $3K 3.09% of compensation. For a SIMPLE IRA, the income remains at $100K; so the 3K contribution would still be 3%.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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