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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