2019 SIMPLE IRA Contribution Limit
For 2019, the SIMPLE IRA Contribution Limit is $13,000 (Salary reduction limit) and +$3,000 (Catch-up limit, age 50 and over).
Effective 2019-01-01Source: Notice 2018-83 (IRS)Verified 2026-08-29
Compared with 2018
| Item | 2018 | 2019 | Change |
|---|---|---|---|
| Salary reduction limit | $12,500 | $13,000 | +$500 (+4.0%) |
| Catch-up limit, age 50 and over | +$3,000 | +$3,000 | +$0 (+0.0%) |
Who it applies to
Employees participating in a SIMPLE IRA plan under IRC § 408(p)
What changed this year, and why
For 2019, the IRS increased the SIMPLE IRA salary reduction contribution limit to $13,000, up from $12,500 in 2018. The catch-up contribution limit for participants age 50 and over remained at $3,000.
Common questions
- How much can I contribute to a SIMPLE IRA in 2019 through salary reduction?
- The salary reduction limit for 2019 is $13,000.
- Can participants age 50 or older make additional contributions?
- Yes. Participants who are age 50 or older may contribute an additional $3,000 as a catch-up contribution.
Only employers with 100 or fewer employees
A SIMPLE IRA plan can only be adopted by an employer that had 100 or fewer employees who received $5,000 or more in compensation during the preceding calendar year. The count includes every worker on the payroll at any time during that year, even those who did not meet the eligibility threshold to participate in the plan itself, as well as self-employed individuals with earned income and leased employees. An employer that already maintains another qualified retirement plan generally cannot also maintain a SIMPLE IRA plan, though a plan for collective-bargaining employees is excluded from this restriction. Once a SIMPLE IRA plan is in place, the employer must continue to satisfy the 100-employee limit every year it keeps the plan. A grace period is available for employers that grow beyond the limit, so the rule is assessed at adoption and then monitored annually rather than applied retroactively to every headcount fluctuation.
You can set up a SIMPLE IRA plan only if you had 100 or fewer employees who received $5,000 or more in compensation from you for the preceding year.
Publication 560 (2019), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
The $5,000 test that decides who must be let in
An employee becomes eligible to participate in the employer's SIMPLE IRA plan once he or she has received at least $5,000 in compensation during any two of the years before the current calendar year and is reasonably expected to earn at least $5,000 in the current year. The two prior years do not need to be consecutive - any two preceding years in which the $5,000 threshold was met will satisfy the test. The employer may not impose stricter eligibility conditions than this, though it is free to adopt less restrictive ones, such as lowering or eliminating the prior-year compensation requirement or the current-year expectation. The term "employee" includes a self-employed individual who received earned income. Because the rule is written around a $5,000 threshold measured over a rolling two-year lookback, seasonal and part-time workers who cross that line in any two prior years must be allowed to make salary-reduction contributions once they are reasonably expected to reach $5,000 again.
Any employee who re- ceived at least $5,000 in compensation during any 2 years preceding the current calendar year and is reasonably expected to receive at least $5,000 during the current calendar year is eligi- ble to participate.
Publication 560 (2019), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
A new plan has to be in place by October 1
A new SIMPLE IRA plan can be made effective on any date from January 1 through October 1 of a calendar year, but only if the employer did not previously maintain a SIMPLE IRA plan. This means an employer adopting a SIMPLE IRA for the first time has until October 1 to have the plan in place for that year. An exception exists for a brand-new employer that comes into existence after October 1: such an employer may still establish a plan for that year as long as it is set up as soon as administratively feasible after the business begins. If the employer previously maintained a SIMPLE IRA plan, however, the rule is stricter and a new plan year can begin only on January 1. A plan cannot have an effective date earlier than the date it is actually adopted, so employers that want the plan to cover a given year must complete the adoption paperwork by October 1 at the latest.
You can set up a SIMPLE IRA plan effective on any date from January 1 through October 1 of a year, provided you didn't previously maintain a SIMPLE IRA plan.
Publication 560 (2019), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
What your employer has to put in
Unless the employer elects the alternative nonelective contribution method, the employer must match each participating employee's salary reduction contributions dollar for dollar up to 3% of the employee's compensation. Only employees who actually choose to defer pay receive this match; those who do not make salary reduction elections get nothing under the matching formula. The 3% figure is the standard required level. The employer does have the option to select a lower matching percentage, provided it instead makes a nonelective contribution of compensation for every eligible employee regardless of whether the employee defers. For 2019, the maximum salary reduction an employee could make was $13,000, so the full employer match for a worker who defers the entire limit would equal 3% of that employee's compensation. The matching obligation runs for the entire plan year and applies uniformly to every eligible employee who elects to contribute. This rule ensures that all employees who choose to save receive a meaningful employer contribution.
You are generally required to match each employee's salary reduction contribution(s) on a dol- lar-for-dollar basis up to 3% of the employee's compensation, where only employees who have elected to make contributions will receive an employer matching contribution.
Publication 560 (2019), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
The catch-up is not automatic: age 50 by year end, and the plan must allow it
Catch-up contributions are not automatic. A SIMPLE IRA plan must affirmatively permit them, and even then only participants who are age 50 or over at the end of the calendar year qualify. For 2019 the catch-up limit is an additional $3,000, which a qualifying participant may contribute on top of the regular salary reduction limit of $13,000. The catch-up amount cannot exceed the lesser of the $3,000 cap or the participant's compensation remaining after regular elective deferrals. Catch-up contributions are also excluded when applying the overall salary reduction cap, so they do not reduce the amount available under the $13,000 regular limit. Employers and plan sponsors should confirm in the written plan document that catch-up contributions are allowed and should communicate the option to employees who will turn 50 before the close of the year, since eligibility is measured at year end rather than at the time each contribution is made.
A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to elec- tive deferrals and SIMPLE plan salary reduction contributions.
Publication 560 (2019), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
Withdrawing in the first two years costs 25%
Early distributions from a SIMPLE IRA are generally subject to an additional tax on top of ordinary income tax. During the first two years of participation in the plan, however, that additional tax is increased to 25%. The two-year clock starts on the date the employee first begins participating in the SIMPLE IRA plan, not on the first day of any calendar year, so an employee who joined mid-year must count two full years from that enrollment date. Once the two-year participation period has elapsed, the higher 25% rate no longer applies and distributions are treated under the ordinary early-withdrawal rules that govern traditional IRAs. Because the elevated rate is tied to the start of participation, employees who change employers and begin a new SIMPLE IRA plan restart the two-year period with the new plan. Workers should be aware of this rule when considering early withdrawals, since the penalty during the initial participation window is substantially larger than the standard early-withdrawal rate.
However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning participation.
Publication 560 (2019), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Notice 2018-83 (IRS)
- Salary reduction limit
The limitation under § 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,500 to $13,000.
- Catch-up limit, age 50 and over
The dollar limitation under § 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in § 401(k)(11) or 408(p) for individuals aged 50 or over remains unchanged at $3,000.