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Simple IRA Contribution Limits for 2009, 2008 - 2003

A SIMPLE IRA is an employer sponsored retirement plan, which is used by small businesses (generally businesses with less than 100 employees, but there is also a 2-year grace period for businesses over the 100-employee to still be considered a small business).

SIMPLE IRAs allow eligible employees to contribute a limited part of their pre-tax pay to the retirement plan. The employer may choose to make either matching contributions or nonelective contributions. Contributions to a SIMPLE IRA plan are immediately 100% vested.

Employer Contribution Limits:

With a SIMPLE IRA plan the employer contribution limits are:

  • up to 3% of the employee's pay for a contribution matching the employees' elective-deferral contributions dollar-for-dollar
  • 2% nonelective contributions for all eligible employees even if they don't make deferral contributions

Employee Contribution Limits:

SIMPLE IRA Limits
Year AGE 49 & BELOW AGE 50 & ABOVE
2003 $8,000 $9,000
2004 $9,000 $10,500
2005 $10,000 $12,000
2006 $10,000 $12,500
2007 $10,500 $13,000
2008 $10,500 $13,000
2009 $11,500 $14,000

As you can see from the table above the contributions to a SIMPLE IRA plan are limited to $11,500 for 2009 (increased from $10,500 for 2008). For the employees above the age of 50 the "catch-up" amount remains the same, $2,500 for 2009, which sets the SIMPLE IRA contribution limit at $14,000 for those above the age 50).

Employees over the age of 70 ½ cannot make contributions, but their employer can.

A disadvantage of SIMPLE IRA plans is that their contribution limits are less compared to the contribution limits of a qualified 401k or 403b plan. Yet, the tax-deferred contributions are higher compared to those of a traditional or Roth IRA.

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