2025 SIMPLE IRA Contribution Limit
For 2025, the SIMPLE IRA Contribution Limit is $16,500 (Salary reduction limit) and +$3,500 (Catch-up limit, age 50 and over).
Effective 2025-01-01Source: Notice 2024-80 (IRS)Verified 2026-08-29
Compared with 2024
| Item | 2024 | 2025 | Change |
|---|---|---|---|
| Salary reduction limit | $16,000 | $16,500 | +$500 (+3.1%) |
| Catch-up limit, age 50 and over | +$3,500 | +$3,500 | +$0 (+0.0%) |
Who it applies to
The $16,500 is the participant's own figure. Notice 2024-80 states it as the limitation on salary reduction contributions under a SIMPLE retirement account and on elective contributions under a SIMPLE plan described in section 401(k), so it follows what an employee elects to defer. The same notice sets a separate limitation under section 408(p) for additional nonelective contributions for an employee, which is a different amount for a different kind of contribution. The $3,500 catch-up comes from section 414 and applies to individuals aged 50 or over in a plan described in section 401(k) or section 408(p), which is what makes it the SIMPLE catch-up rather than the general employer plan one. The notice also states a higher salary reduction limitation for certain of those accounts or plans, and a further catch-up figure for an older age band, each as its own amount.
What changed this year, and why
For 2025 the limitation that generally applies to salary reduction contributions under a SIMPLE retirement account, or to elective contributions under a SIMPLE plan described in section 401(k), is $16,500, increased from the amount that applied for the prior year. The catch-up limitation under section 414 that generally applies for individuals aged 50 or over in such a plan remains $3,500. So the deferral figure moved for 2025 and the age 50 catch-up did not. Notice 2024-80 states a separate, higher salary reduction limitation for certain of those accounts or plans, and further catch-up amounts, as figures of their own.
Common questions
- What is the 2025 SIMPLE IRA contribution limit?
- For 2025 the limitation that generally applies to salary reduction contributions under a SIMPLE retirement account is $16,500. Notice 2024-80 states it as an increase over the amount that applied for the prior year. The figure covers what a participant elects to defer; the notice sets employer nonelective contributions under a separate limitation in section 408(p), with its own amount.
- Can I contribute more to a SIMPLE IRA if I am 50 or older?
- Yes. Notice 2024-80 states that the catch-up limitation under section 414 for a plan described in section 401(k) or section 408(p), which generally applies for individuals aged 50 or over, remains $3,500 for 2025. It is added to the $16,500 salary reduction limitation rather than replacing it, and it is a different figure from the catch-up the notice sets for other employer plans.
- Did the SIMPLE IRA contribution limit go up for 2025?
- The salary reduction limitation rose to $16,500 for 2025 from the amount that applied for the prior year. The age 50 catch-up under section 414 remains $3,500, unchanged. Notice 2024-80 applies rounding rules to each amount separately, which is how one figure can step up in a year while another under the same heading stays where it was.
- Does the SIMPLE limit also cover a SIMPLE plan under section 401(k)?
- Yes. Notice 2024-80 states one limitation under section 408(p) that generally applies both to salary reduction contributions under a SIMPLE retirement account and to elective contributions under a SIMPLE plan described in section 401(k). The $16,500 for 2025 is that single figure, so the notice does not give the two arrangements different deferral ceilings.
- Is there a higher SIMPLE IRA limit for some plans?
- Yes. Alongside the $16,500, Notice 2024-80 states a higher limitation under section 408(p) for certain of those accounts or plans, published as its own amount for 2025. It is a separate figure rather than an adjustment to the $16,500, and the notice identifies it only by the provision it falls under, not by the conditions that put a plan into that group.
- Are there other SIMPLE IRA catch-up amounts besides the age 50 one?
- Yes. Notice 2024-80 states a further catch-up limitation under section 414 for individuals who attain age 60 through age 63 in 2025 in a plan described in section 401(k) or section 408(p), and another for certain accounts or plans in that group. Each is published as its own amount for 2025 and neither is the $3,500 figure that applies for individuals aged 50 or over.
- Do employer contributions count toward the $16,500 SIMPLE limit?
- The $16,500 is stated as the limitation on salary reduction contributions and elective contributions, which is what a participant elects to defer. Notice 2024-80 separately states a limitation under section 408(p) for additional nonelective contributions for an employee to a SIMPLE retirement account, with its own amount for 2025. The notice keeps the two as distinct limitations rather than one combined ceiling.
- Where does the 2025 SIMPLE IRA limit come from?
- Notice 2024-80, titled 2025 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living. Section 415 requires the Secretary of the Treasury to adjust these limitations annually for cost-of-living increases, and the SIMPLE amounts are among those the notice adjusts on that schedule, after the applicable rounding rules. The salary reduction figure comes from section 408(p) and the catch-up from section 414.
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
To open a SIMPLE IRA plan, an employer must satisfy two requirements. First, in the prior calendar year the employer must have had 100 or fewer employees who each received at least $5,000 in compensation. Every person employed at any point during that year is counted for this headcount, even if they were part-time, seasonal, or otherwise not eligible to participate in the plan. The count also includes self-employed individuals who earned income from the business and any leased employees. Second, the employer cannot maintain any other qualified retirement plan, with the sole exception of a plan covering only employees under a collective bargaining agreement. Once a SIMPLE IRA plan is established, the employer must meet the 100-employee limit every year it keeps the plan. However, a grace period exists: if the employer exceeds the limit in a later year, the plan may continue for two more calendar years. A business with more than 100 employees receiving $5,000 or more cannot start a SIMPLE IRA plan.
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 (2025), 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 any employee who received at least $5,000 in compensation during any two years preceding the current calendar year and is reasonably expected to receive at least $5,000 during the current year. Both prior-year tests must be met, so a worker who earned $5,000 in only one earlier year does not automatically qualify. An employer may make the rules less restrictive by reducing or eliminating the prior-year compensation threshold, the current-year threshold, or both, but may never make them more restrictive. No other conditions, such as hours worked or job classification, may be imposed beyond what the IRS specifies. Self-employed individuals who received earned income are treated as employees for this test.
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 (2025), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
A new plan has to be in place by October 1
A SIMPLE IRA plan cannot take effect on an arbitrary day. The plan may be established to start on any date between January 1 and October 1 of the year, but only if the employer has never maintained a SIMPLE IRA plan before. A new employer that comes into existence after October 1 may still set up a plan for that year, as long as it is adopted as soon as administratively feasible after the business begins operating. If the employer has previously maintained a SIMPLE IRA plan at any point, the plan cannot start mid-year; it may become effective only on January 1 of a year. A plan is never allowed to have an effective date earlier than the date it is actually adopted, regardless of any paperwork timing. Employers therefore need to watch the October 1 deadline carefully when setting up their first 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 (2025), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
What your employer has to put in
The employer must generally match each employee's salary reduction contribution dollar for dollar, up to 3% of the employee's compensation. Only employees who actually elect to make salary reduction contributions receive the match; employees who decline to defer receive nothing from this requirement. The 3% match applies to all compensation the employee earns during the year, so an employee who defers the full $16,500 salary reduction limit on compensation well above that amount still receives a match only on compensation up to the 3% cap. The employer must satisfy this matching formula or an alternative nonelective formula every year the plan is maintained. Matching contributions count toward the employee's overall SIMPLE IRA balance but do not count against the employee's own salary reduction limit of $16,500.
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 (2025), 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 allow 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 plan document must affirmatively permit it, and the participant must be at least age 50 by December 31 of the year for which the contribution is made. For 2025, the catch-up limit for SIMPLE plans is generally $3,500, which is the verified figure set by the IRS. The catch-up amount is in addition to the regular salary reduction limit of $16,500 for 2025, so an eligible participant who is at least 50 and whose plan allows catch-ups may defer up to $16,500 plus $3,500 in the same year, provided the plan's terms permit the additional deferral.
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 (2025), 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 on top of ordinary income tax. However, during the first two years of participation in the plan, the additional tax is increased to 25% if funds are withdrawn. This heightened penalty applies from the date the employee first begins participating in the SIMPLE IRA plan and lasts for exactly two years; after that two-year window closes, the penalty drops back to the standard 10% rate. The two-year period is measured from the start of participation, not from the date the plan itself was established, so each employee's clock runs individually. The rule applies whether the distribution is taken as a cash withdrawal or, in certain cases, as a transfer that does not qualify as a tax-free rollover to a non-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 (2025), 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 2024-80 (IRS)
- Salary reduction limit
is increased from $16,000 to $16,500.
- Catch-up limit, age 50 and over
generally applies for individuals aged 50 or over remains $3,500.