SIMPLE IRA rules and contribution limits
As mentioned, there are two types of SIMPLE IRA contributions: elective employee contributions and non-elective employer contributions.
Employee contributions are limited to 100% of salary or $16,500 (2025) and $17,000 (2026), whichever is less, in most plans. Employees who are 50 or older can make an additional catch-up contribution of $3,500 in 2025 and $4,000 in 2026.
However, there are some new rules for SIMPLE IRAs under the Secure Act 2.0:
- For employers with 25 or fewer workers, employees can contribute up to $17,600 in 2025 and $18,100 in 2026. Workers 50 and older are eligible to make catch-up contributions of up to $3,850 in 2025 and 2026.
- Employers with 26 to 100 workers are eligible for the higher limits listed above -- but only if they implement the higher employer contribution rates of a flat 3% of workers' salaries or a dollar-for-dollar 4% match.
- Beginning in 2025, workers aged 60 to 63 can make catch-up contributions of 150% of the standard amount, bringing the maximum SIMPLE IRA catch-up contribution to $5,250 in 2025 and 2026.
Contributions are made through payroll deductions and aren’t subject to income tax. They are, however, still subject to FICA and unemployment taxes.
Employee SIMPLE IRA contributions do not preclude contributions to other employer-sponsored retirement plans an employee may have. Contributing to a SIMPLE IRA doesn’t prevent employees from opening their own IRAs and contributing. For those who rely on a backdoor Roth IRA, however, the SIMPLE IRA account may cause problems.
