2024 SIMPLE IRA Contribution Limit
For 2024, the SIMPLE IRA Contribution Limit figures are $16,000 (Salary reduction limit) and +$3,500 (Catch-up limit, age 50 and over).
Effective 2024-01-01Source: Notice 2023-75 (IRS)Verified 2026-09-02
Compared with 2023
| Item | 2023 | 2024 | Change |
|---|---|---|---|
| Salary reduction limit | $15,500 | $16,000 | +$500 (+3.2%) |
| Catch-up limit, age 50 and over | +$3,500 | +$3,500 | +$0 (+0.0%) |
Who it applies to
Employees who participate in a SIMPLE IRA plan (Savings Incentive Match Plan for Employees) under section 408(p) of the Internal Revenue Code.
What changed this year, and why
For 2024, the IRS increased the SIMPLE IRA salary reduction contribution limit.
Common questions
- What is the SIMPLE IRA salary reduction contribution limit for 2024?
- Effective January 1, 2024, an employee may make salary reduction contributions of up to $16,000 to a SIMPLE IRA.
- Is there an additional catch-up contribution for older employees?
- Yes. Effective January 1, 2024, employees aged 50 or older may contribute an additional $3,500 as a catch-up contribution on top of the regular salary reduction limit.
Every amount on this page is a published figure rather than yours. The SIMPLE IRA contribution planner takes the number you enter and works it out against them, showing which published figure it used.
Only employers with 100 or fewer employees
A business can establish a SIMPLE IRA plan only if it had 100 or fewer employees who received $5,000 or more in compensation during the preceding calendar year. In counting toward that ceiling, the employer must include every employee who worked at any point during the year - not just those who meet the plan's eligibility test - as well as self-employed individuals who received earned income and leased employees. An employer that already maintains another qualified retirement plan generally cannot adopt a SIMPLE IRA, unless the other plan covers only collective bargaining employees. Once a SIMPLE IRA plan is in place, the employer must continue to satisfy the 100-employee limit in every subsequent year it maintains the plan; if the workforce grows beyond that threshold, special transition rules may allow the employer to keep the plan alive for a limited grace period while it arranges a different retirement vehicle.
Employee limit. 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 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
The $5,000 test that decides who must be let in
A SIMPLE IRA plan must include 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 year. The term "employee" includes a self-employed individual who received earned income. An employer may not impose stricter requirements than these, but it may choose to use less restrictive ones by lowering or eliminating the prior-year or current-year compensation thresholds. This two-year look-back means that an employee who earned below $5,000 in one of the prior two years but above $5,000 in the other still qualifies, so long as they meet the reasonable expectation for the current year. Employers should track compensation carefully each year because once an employee satisfies this test, they must be given the opportunity to make salary reduction contributions.
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 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
A new plan has to be in place by October 1
A first-time SIMPLE IRA plan can be established with an effective date on any day from January 1 through October 1 of a given calendar year. This means an employer who has never before maintained a SIMPLE IRA plan has roughly the first nine months of the year to adopt one retroactively to the start of that year. However, this flexibility is available only to employers that did not previously maintain a SIMPLE IRA plan. If a prior plan existed, a new SIMPLE IRA plan can be made effective only on January 1 of a year. An exception applies to new employers that come into existence after October 1: they may establish a SIMPLE IRA plan for that same year as soon as administratively feasible after the business begins operating, even if the calendar date is past October 1. Employers planning to start a SIMPLE IRA plan should keep these timing constraints in mind so the plan is valid for the intended year.
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 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
What your employer has to put in
Under the default matching formula, a SIMPLE IRA employer 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 the match; employees who decline to contribute get nothing from this requirement. The employer has an alternative: instead of matching, it can make a nonelective contribution of a fixed percentage of compensation for every eligible employee, whether or not the employee chooses to defer. Regardless of which formula is chosen, the employer must notify eligible employees of the terms before the election period begins. Recent legislation allows certain employers to elect higher matching provisions for participants who make larger salary reduction contributions, offering additional flexibility beyond the standard 3% match.
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 (2024), 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 for a SIMPLE IRA are not automatic. A plan must expressly permit them, and the participant must be age 50 or over at the end of the calendar year. If both conditions are met, the participant may make catch-up contributions in addition to regular elective deferrals and SIMPLE plan salary reduction contributions. For 2024, the catch-up contribution limit for SIMPLE plans is $3,500, and the regular salary reduction limit is $16,000. The plan document must include provisions allowing catch-up contributions; if the plan is silent or prohibits them, no participant can make catch-up contributions regardless of age. Employers should review their plan terms to confirm catch-up contributions are permitted and communicate this option to eligible employees before the contribution deadline.
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 (2024), 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 an additional tax on top of ordinary income tax. However, if funds are withdrawn within 2 years of beginning participation in the plan, that additional tax is increased to 25%. The two-year period starts on the date the participant first begins participating in the SIMPLE IRA plan, not from the date of each individual contribution. This heightened penalty is designed to encourage participants to leave early distributions in the account during the initial period when the plan is new. After the two-year window closes, any subsequent early withdrawal is subject only to the standard additional tax rate, unless another exception applies. Participants considering a withdrawal in their first years of plan participation should be aware that the cost of accessing those funds is significantly higher than it will be later.
However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning partici- pation.
Publication 560 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
The two model forms that set up the plan, and which to use
To establish a SIMPLE IRA plan, employers must use one of two model plan documents provided by the IRS: Form 5304-SIMPLE or Form 5305-SIMPLE. The choice between these forms depends on who selects the financial institution that will receive the plan contributions. If the employer allows each employee to choose their own financial institution, Form 5304-SIMPLE must be used. However, if the employer requires that all contributions be deposited at a single designated financial institution, Form 5305-SIMPLE is the appropriate form. Once the appropriate form is completed with all required information and signed by the employer (and the financial institution if applicable), the SIMPLE IRA plan is officially adopted. The original signed form must be retained by the employer but should not be filed with the IRS. These model forms serve as the foundational plan documents that establish the terms and administration of the SIMPLE IRA arrangement.
You can use Form 5304-SIMPLE or Form 5305-SIMPLE to set up a SIMPLE IRA plan. Each form is a model SIMPLE plan document. Which form you use depends on whether you select a financial institution or your employees select the institution that will receive the contributions. Use Form 5304-SIMPLE if you allow each plan partici- pant to select the financial institution for receiving their SIMPLE IRA plan contributions. Use Form 5305-SIMPLE if you require that all contributions under the SIMPLE IRA plan be deposited initially at a designated financial institu- tion.
Publication 560 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
You generally cannot run a SIMPLE IRA alongside another qualified plan
To establish a SIMPLE IRA plan, an employer must satisfy two basic eligibility requirements. The employer must meet a specified employee limit based on compensation received during the preceding calendar year, and the employer must not maintain any other qualified retirement plan. This second requirement means that if an employer already sponsors a 401(k), profit-sharing plan, defined benefit pension plan, or any other qualified arrangement, it cannot also maintain a SIMPLE IRA for the same workforce. The only exception to this rule is when the other qualified plan covers only employees who are part of a collective bargaining agreement. For all other employees, the employer must choose between maintaining the existing qualified plan or switching entirely to a SIMPLE IRA structure. This restriction ensures that SIMPLE plans remain a simplified option for small employers without other retirement arrangements.
You can set up a SIMPLE IRA plan if you meet both the following requirements. • You meet the employee limit. • You don't maintain another qualified plan unless the other plan is for collective bargaining employees.
Publication 560 (2024), 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 2023-75 (IRS)
- Salary reduction limit
The limitation under section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $15,500 to $16,000.
- 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 $3,500.