What Is the Deadline for SIMPLE IRA Contributions?
Understand the key deadlines for SIMPLE IRA contributions, including employee, employer, and catch-up contributions, to ensure timely and compliant funding.
A SIMPLE IRA is a retirement savings plan for small businesses and their employees, offering tax advantages similar to other IRAs. Both employees and employers contribute, making it an accessible option for retirement planning. Understanding contribution deadlines is essential to maximizing benefits and avoiding penalties.
Missing deadlines can mean losing tax advantages or employer matching funds. To ensure compliance and make the most of this plan, both employees and employers must adhere to specific timelines.
Employee Contribution Deadlines
Employees must ensure their salary deferral contributions are deposited on time to receive tax benefits. The IRS requires employers to transfer these contributions as soon as administratively feasible, but no later than 30 days after the end of the month in which the salary was withheld. For example, if a contribution is deducted on March 15, the employer must deposit it by April 30.
Delays can lead to compliance issues. If an employer fails to transfer funds within the required timeframe, it may be considered a prohibited transaction, potentially resulting in penalties. Employees should check account statements regularly and address discrepancies with their employer immediately to avoid tax complications.
Employer Contribution Deadlines
Businesses offering a SIMPLE IRA must follow deadlines for employer contributions, which can be either a dollar-for-dollar match of up to 3% of an employee’s compensation or a nonelective contribution of 2% for all eligible employees.
The IRS requires employer contributions to be deposited by the business’s tax filing deadline, including extensions. For most employers, this means contributions must be made by April 15 of the following year if filing without an extension. If the business files for an extension, the deadline is October 15. For example, contributions for the 2024 tax year must be deposited by April 15, 2025, unless an extension is granted.
Missing these deadlines can result in tax consequences. Late contributions may not be deductible for the intended tax year, and the IRS may impose penalties. Employers should track deposit schedules and coordinate with payroll providers to ensure timely contributions.
Catch-Up Contribution Windows
Employees aged 50 or older can contribute additional funds beyond the standard annual limit. This catch-up provision helps individuals increase their retirement savings as they near retirement. For 2024, the catch-up contribution limit is $3,500, bringing the total possible employee contribution to $19,000. These limits are periodically adjusted for inflation, so checking the latest IRS updates is recommended.
Catch-up contributions follow the same timing rules as standard contributions but require employees to elect them. Employees must notify their employer and complete the necessary paperwork to increase their deferral amount. Employers do not automatically apply catch-up contributions, so employees who do not opt in remain subject to the regular contribution limits.