2023 SIMPLE IRA Contribution Limit
For 2023, the SIMPLE IRA Contribution Limit is $15,500 (Salary reduction limit) and +$3,500 (Catch-up limit, age 50 and over).
Effective 2023-01-01Source: Notice 2022-55 (IRS)Verified 2026-08-29
Compared with 2022
| Item | 2022 | 2023 | Change |
|---|---|---|---|
| Salary reduction limit | $14,000 | $15,500 | +$1,500 (+10.7%) |
| Catch-up limit, age 50 and over | +$3,000 | +$3,500 | +$500 (+16.7%) |
Who it applies to
Employees who participate in a SIMPLE IRA plan established under section 408(p) of the Internal Revenue Code, and their employers.
What changed this year, and why
For 2023, the IRS increased the salary reduction contribution limit for SIMPLE IRA plans and the catch-up contribution limit for participants aged 50 or over.
Common questions
- What is the salary reduction contribution limit for a SIMPLE IRA in 2023?
- Effective January 1, 2023, an eligible employee may elect to defer up to $15,500 of compensation into a SIMPLE IRA as salary reduction contributions.
- Is there an additional catch-up contribution for older participants?
- Yes. Participants who are age 50 or over may make an additional catch-up contribution of $3,500, effective January 1, 2023.
Only employers with 100 or fewer employees
To offer 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. Every worker counts for this headcount - full-time, part-time, self-employed individuals with earned income, and leased employees - even if they would not themselves be eligible to participate. An employer that already maintains another qualified retirement plan (other than one covering only collective-bargaining employees) generally cannot adopt a SIMPLE IRA plan. Once a SIMPLE IRA plan is established, the employer must continue to meet the 100-employee limit each year it maintains the plan. If the employer later grows beyond that threshold, a grace period allows the plan to remain in force for the calendar years immediately following the year the limit was last met, giving a growing business time to consider transitioning to a different plan format.
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 (2023), 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 its SIMPLE IRA plan every employee who received at least $5,000 in compensation during any 2 years preceding the current calendar year and who is reasonably expected to receive at least $5,000 during the current calendar year. This is the most restrictive eligibility test the employer is permitted to impose; the plan may adopt looser standards - for example, by requiring fewer prior years of earnings or by lowering the dollar threshold - but it cannot tighten them. The term "employee" for this purpose includes a self-employed individual who received earned income. The employer may not add any other condition for participation, such as minimum hours worked or a minimum age. Once an employee satisfies this test, the employer must establish a SIMPLE IRA for that person, who may then make salary reduction contributions up to $15,500, plus a $3,500 catch-up amount if the employee is age 50 or over.
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 (2023), 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, provided the employer did not previously maintain a SIMPLE IRA plan. An employer that comes into existence after October 1 of the year the plan is set up is exempt from this cutoff and may establish the plan as soon as administratively feasible after the business begins. By contrast, if the employer previously maintained a SIMPLE IRA plan, a successor plan can take effect only on January 1 of a year. In no case may a plan's effective date be earlier than the date it is actually adopted. Employers adopting a plan for the first time should note that once the plan is in place, eligible employees may defer up to $15,500 in salary reduction contributions, and participants who are age 50 or over by the end of the calendar year may add $3,500 in catch-up contributions.
Deadline for setting up a SIMPLE IRA plan. 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 (2023), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
What your employer has to put in
Unless the employer elects the nonelective contribution alternative, it is generally required to match each employee's salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee's compensation. Only employees who have actually elected to make salary reduction contributions receive this employer match. The 3% match is the standard safe-harbor formula that satisfies the SIMPLE IRA design. The employer may instead choose to make nonelective contributions for all eligible employees, but if it uses the matching method, the 3% rate is the benchmark. This employer match is separate from the salary reduction contributions that employees make on their own behalf, which are limited to $15,500. Participants who are age 50 or over by the end of the calendar year may contribute an additional $3,500 as a catch-up amount on top of that limit.
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 (2023), 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 expressly permit them, and the participant must be age 50 or over at the end of the calendar year. When both conditions are satisfied, the participant may make catch-up contributions in addition to regular elective deferrals and SIMPLE plan salary reduction contributions. For SIMPLE plans, the catch-up limit is $3,500, which is available on top of the regular salary reduction limit of $15,500. If the plan document does not include language authorizing catch-up contributions, no participant - regardless of age - can make them. Employers should confirm that the catch-up feature is included in their plan's terms and that eligible employees who are age 50 or over by the end of the calendar year are made aware of the additional $3,500 they may defer above the regular limit.
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 (2023), 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 normally subject to a 10% additional tax, the same penalty that applies to early withdrawals from most retirement accounts. However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning participation in the plan. The 2-year period runs from the date the employee first became a participant in the SIMPLE IRA plan, not from the date of the first contribution. During those first 2 years, a participant who takes a distribution faces an additional tax of 25% on top of ordinary income tax - a rate significantly higher than the standard 10% that applies once the 2-year period has passed. Participants should weigh this enhanced penalty carefully before taking early withdrawals from a SIMPLE IRA.
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 (2023), 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 2022-55 (IRS)
- Salary reduction limit
The limitation under section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $14,000 to $15,500.
- 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 is increased from $3,000 to $3,500.