SIMPLE IRA Contributions Not Affecting amount an individual can contribute to a ROTH or Traditional IRA

[TD]

"Simple" question: the instructions in IRS Publication 560, Retirement Plans for Small Businesses, say that contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA.  However, I thought that if you participated in a qualified retirement plan, that affected the deductibility of contributions to a traditional IRA?  

In addition, I have a question re contributions to IRAs. On page 7 of publication 590-A, it says a trustee or custodian generally cannot accept contributions of more than the deductible amount for the year.   But I thought folks may make nondeductible contributions to traditional IRAs, subject to the dollar limits and applicable filing status limits?  

 

 

[CuseFan]

37 minutes ago, TD said:

contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA

I don't deal with these plans, but it could mean simply that the contribution to the SIMPLE does not count as an IRA contribution and so a full IRA contribution can also be made. The plan/no plan issue (as well as income) affects deductibility, not amount.

[Tom Veal]

A contribution to a SIMPLE IRA doesn't count against what a participant may contribute to his personal traditional or Roth IRA.  His deduction of traditional IRA contributions may, however, be limited, depending on his adjusted gross income.  Nondeductible contributions are discussed on page 15 of Publication 590-A.

Tom Veal

ERISA Cavalry PLLC

www.ERISACavalry.com

[G8Rs]

That's correct as far as what it had been in the past and what's intended in the future. SECURE 2.0 inadvertently changed this, but it's one of the technical errors that Congress stated that it intends to fix. 

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Section 601 permitted SIMPLE IRA and SEP plans to include a Roth IRA. It might be read as requiring SEP and SIMPLE contributions to be included in determining whether or not an individual has exceeded the contribution limit to a Roth IRA.

“However, Congress intended to retain the result under the law as it existed before SECURE 2.0 was enacted regarding SIMPLE IRA and SEP contributions. Thus, Congress intended that no contributions to a SIMPLE IRA or SEP plan (including Roth contributions) be taken into account for purposes of the otherwise applicable Roth IRA contribution limit,” the letter says.