SIMPLE IRA - Yr end true up

[Guest Elfman]

An employee earns $10,000 the first half of the year and defers 6% ($600) into their simple IRA plan. The employer then contributes the 3% ($300) to that persons account as they are matching on a pay period basis (versus year end). The second half of the year the employee earns an additional $10,000, but elects to defer nothing.

Is the employer require to fund an additional $300 since the person made $20,000 and deferred a total of 3%, but the employer matched only 1.5%? Please advise.

Elfman

[jevd]

The match requirement is $ for $ up to 3% not required to match 3%. In this case an additional $300 match is required. Unless of course he previously chose a lesser percentage as low as 1%

[Guest Elfman]

That's what I thought. My guess is that less than 5% of companies who are matching throughout the year (as opposed to making the contribution after the end of the year) make a 'True Up' contribution at the end of the year. Most of them incorrectly think that as long as they match on a pay period basis, that they are OK. Companies who give bonuses, but do not require employees to withhold on those bonuses are typically ones where a True up is required.

Thanks,

Elfman