2022 SIMPLE IRA Contribution Limit
For 2022, the SIMPLE IRA Contribution Limit is $14,000 (Salary reduction limit) and +$3,000 (Catch-up limit, age 50 and over).
Effective 2022-01-01Source: Notice 2021-61 (IRS)Verified 2026-08-29
Compared with 2021
| Item | 2021 | 2022 | Change |
|---|---|---|---|
| Salary reduction limit | $13,500 | $14,000 | +$500 (+3.7%) |
| Catch-up limit, age 50 and over | +$3,000 | +$3,000 | +$0 (+0.0%) |
Who it applies to
Employees who participate in a SIMPLE IRA plan under section 408(p) of the Internal Revenue Code.
What changed this year, and why
Effective January 1, 2022, the salary reduction limit for SIMPLE IRAs increased to $14,000. The catch-up contribution limit for participants aged 50 and over remains unchanged at $3,000.
Common questions
- What is the SIMPLE IRA contribution limit for 2022?
- In 2022, the salary reduction limit for SIMPLE IRAs is $14,000.
- Is there a catch-up provision for older participants?
- Participants aged 50 or older may make an additional $3,000 in catch-up contributions on top of the regular limit.
Only employers with 100 or fewer employees
To establish a SIMPLE IRA plan, an employer must have had 100 or fewer employees who received $5,000 or more in compensation during the preceding calendar year. This count includes every person employed at any time during the year, not only those who are eligible to participate. Self-employed individuals with earned income and leased employees are also included in the tally. Once a SIMPLE IRA plan is in place, the employer must continue to satisfy the 100-employee limit in every subsequent year. A separate rule bars an employer from maintaining a SIMPLE IRA plan if it already sponsors another qualified retirement plan, unless that other plan covers only collective bargaining employees.
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 (2022), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
The $5,000 test that decides who must be let in
An employer must include in a SIMPLE IRA plan any employee who received 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 year. The test looks at total compensation over two prior years, so an employee hired recently may not yet qualify. Employers may, however, use less restrictive eligibility standards by lowering or eliminating the compensation thresholds, but they may never make them more restrictive. The term "employee" for this purpose also covers a self-employed individual who received earned income from the business.
Any employee who received at least $5,000 in compensation during any 2 years preceding the current calendar year and is reasonably expected to re- ceive at least $5,000 during the current calendar year is eligible to participate.
Publication 560 (2022), 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. An employer establishing a plan after October 1 must therefore wait until the next January 1, unless it is a new employer that comes into existence after October 1 and sets up the plan as soon as administratively feasible. If the employer has previously maintained a SIMPLE IRA plan, the new or restarted plan can be effective only on January 1 of a year. In all cases, the plan cannot have an effective date before the date the employer actually adopts it.
You can set up a SIMPLE IRA plan effective on any date from Jan- uary 1 through October 1 of a year, provided you didn't previously maintain a SIMPLE IRA plan.
Publication 560 (2022), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
What your employer has to put in
An employer that chooses the matching formula must match each employee's salary reduction contributions dollar for dollar up to 3% of the employee's compensation. Only employees who actually elected to make salary reduction contributions receive the match; the employer is not required to match contributions for employees who choose not to defer. An employer that does not wish to make matching contributions can instead make nonelective contributions for every eligible employee, whether or not the employee defers any salary. The matching alternative is the default requirement and applies unless the employer affirmatively elects the nonelective contribution. In 2022, the maximum salary reduction an employee can make is $14,000, and the employer's 3% match is calculated on top of that figure.
You are generally required to match each employee's salary reduction con- tribution(s) on a dollar-for-dollar basis up to 3% of the em- ployee's compensation, where only employees who have elected to make contributions will receive an employer matching contribution.
Publication 560 (2022), 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
A SIMPLE IRA plan may permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to their regular elective deferrals and SIMPLE plan salary reduction contributions. The catch-up is not automatic: the participant must be 50 by December 31 of the year in question, and the plan document must affirmatively allow catch-up contributions. For 2022, the catch-up limit for SIMPLE plans is $3,000, which is added on top of the regular salary reduction limit of $14,000. A participant's catch-up contributions for a year cannot exceed the lesser of the catch-up limit or the excess of the participant's compensation over elective deferrals that are not catch-up contributions.
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 elective deferrals and SIMPLE plan salary re- duction contributions.
Publication 560 (2022), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
Withdrawing in the first two years costs 25%
Early withdrawals from a SIMPLE IRA are generally subject to a 10% additional tax. However, during the first 2 years of participation, the additional tax is increased to 25%. The two-year period begins on the date the employee first begins participating in the SIMPLE IRA plan, so it is measured from the employee's start date rather than from any fixed calendar-year boundary. After the two-year anniversary of the employee's initial participation, the ordinary 10% early-withdrawal rate applies again. This heightened penalty makes early distributions from a SIMPLE IRA notably more costly than from a regular IRA during the initial window of plan membership.
Early withdrawals are generally subject to a 10% addi- tional tax. However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning partici- pation.
Publication 560 (2022), 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 2021-61 (IRS)
- Salary reduction limit
The limitation under section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $13,500 to $14,000.
- Catch-up limit, age 50 and over
The dollar limitation under section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in section 401(k)(11) or section 408(p) for individuals aged 50 or over remains unchanged at $3,000.