Changes Not‑SoSimple Not‑SoSimple WWe have many clients with SIMPLE IRA plans who have been asking questions about the new contribution options that are available in these plans. Can an employer with a SIMPLE IRA plan start using some of the new provisions that were created under the SECURE and SECURE 2.0 Acts, such as the increased deferral limit, even though they’re not yet included in the SIMPLE IRA plan document? Yes. Employers may now offer an increased SIMPLE IRA plan elective deferral limit, even though plan documents do not reflect the new provision. In fact, it may be required for some companies to allow these increased limits now, depending upon the size of the company. The increased elective deferral limits apply automatically in the case of an employer that has no more than 25 employees who received $5,000 or more in the preceding calendar year. This means that for the 2024 plan year, the elective deferral limit for these companies is automatically increased to $17,600 plus a catch-up contribution of up to $3,850 for employees who are age 50 and over (110% of the stated annual limit of $16,000 and catch‑up contribution limit of $3,500). For companies that employed 26-100 employees earning $5,000 or more in the preceding calendar year, the increased deferral limit is an optional provision that an employer can elect to offer. If the employer elects to apply this increased limit, the employer must also provide a higher matching contribution of 4% (increased from 3%) or an increased nonelective contribution of 3% (instead of 2%). The IRS clarified in Notice 2024-02 earlier this year that an employer must notify employees of the increased limits if they apply, whether it’s a mandatory increase, or whether the employer is choosing to allow the increase. This notice must be included in the Summary Description that is required to be sent annually to employees no later than 60 days before the beginning of the plan year (Nov. 2). If the employer is choosing to offer the optional increased deferral provision, the employer must take formal written action to make an election to reflect the increased limits and should maintain documentation of the election in the plan’s records in addition to notifying employees with the Summary Description. Employers can also make an additional nonelective contribution of up to 10% of compensation, not to exceed $5,000 (indexed for inflation) annually per eligible employee. This optional contribution is in addition to any employee deferrals and the required employer contribution. Employers that choose to make the additional nonelective contribution must notify employees within the Summary Description. The to SIMPLE IRAs By Carrie Horn, CISP, CHSP, QPA, TGPC, SDIP, ERISA Consultant, Ascensus Colorado Banker 10
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