SIMPLE IRA

[Guest Prof]

If a SIMPLE IRA participant earns $10,000 in w-2 wages, could he defer the full $10,000 into the SIMPLE IRA and get a 3% contribution from the business. This would mean the participant would actually have $10,300 put in for a year in which he earned only $10,000. Is this possible?

[QDROphile]

What are you going to do about FICA withholding and any other payroll deduction amount?

[Gary Lesser]

It is unlikely that the amount he would otherwise have reveived in cash (after deductions/taxes/withholding)plus a match, of say 3 percent, would exceed the original $10,000. That being said, it is possible (just unlikely to happen).

Is there some situation which cd result in 100 percent being taken home on W-2 gross earnings of $10,000?

[saabraa]

It is unlikely that the amount he would otherwise have reveived in cash (after deductions/taxes/withholding)plus a match, of say 3 percent, would exceed the original $10,000. That being said, it is possible (just unlikely to happen).

Is there some situation which cd result in 100 percent being taken home on W-2 gross earnings of $10,000?

My first thought is that 98.55 is a feasible percentage rate for "otherwise received in cash." Our $10,000 individual defers $9,855 and receives a $300 match from the employer, for a total of $10,155. I don't know of anything in the SIMPLE-Ira rules that's been violated.

If the same thing happened in a 401 plan, I don't know how it's NOT a problem, other than having catchup contributions in a SIMPLE 401k plan in 2004.

[Gary Lesser]

Social security taxes and withholding taxes would generally exceed 3 percent.