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SIMPLE IRA, SEP IRA & Individual 401(k) Contribution Limits 2017-2018

SIMPLE IRA Contribution Limits 2017 2018
Employee Elective Deferrals $12,500 $12,500
Catch-Up Elective Deferral Contribution Age 50+  $3,000* $3,000*
Your employer can elect from two different contribution methods. Check with your employer which option they have chosen. Employer contributions are in addition to your elective deferrals.

SEP IRA Contribution Limits 2017 2018
SEP Employer Contribution Limits Up to 25% of compensation, with a maximum of $54,000* Up to 25% of compensation, with a maximum of $55,000*
SEP Current Year Compensation Limits $600 $600

Individual 401(k) Plan 2017 2018
Employer Contributions Up to $54,000 Up to $55,000
Employee Elective Deferrals Up to $18,000 Up to $18,500
Catch-Up Elective Deferral Contribution Age 50+ Up to $6,000 Up to $6,000
The employer can contribute up to 25% of your compensation up to the maximum limit.  Employer contributions and employee elective deferrals in aggregate may not exceed $54,000 for 2017 and $55,000 for 2018 combined. Compensation limits and deductibility apply so contact your employer for further information.

SIMPLE IRA Contributions

A SIMPLE IRA is an employer-sponsored plan for businesses with 100 or fewer employees. Contributions come from both employee salary reductions and employer non-elective or matching contributions (similar to those found in a 401(k) plan). SIMPLE IRA plans impose less administrative burdens on employers because unlike other employer sponsored plans like a 401(k), SIMPLE plans are not subject to discrimination tests.

Eligibility

  • Employer eligibility to establish plan: Any business, sole proprietor, partnership, or corporation with fewer than 100 employees who earned at least $5,000 in the preceding year.
  • Employer cannnot maintain and contribute to any other employer retirement plan in the same calendar year.

Contribution and Limits

  • Employer: Mandatory 3% match, or 2% non-elective contribution.
  • Employee: Maximum deferral limit of $12,500 ($15,500 if age 50 or older for the calendar year).

Characteristics and Highlights

  • Contributions come from both the employee and employer.
  • May not be terminated mid-year.
  • Required minimum distributions begin at age 70 ½.

 


 

SEP IRA Contributions

A Simplified Employee Pension Plan (SEP) allows an employer to contribute on a tax-favored basis to IRAs owned by its employees. Unlike other employer plans such as a 401(k) plans it is not subject to the reporting and disclosure requirements of most retirement plans. Under a SEP, a Traditional IRA is set up by or for an employee to accept the employer’s contributions. These Traditional IRAs are also known as SEP IRAs at most financial institutions.

Eligibility

  • Employer eligibility to establish plan: Any business, sole proprietor, partnership, or corporation.
  • Employee eligibility to participate: Have reached age 21, have worked for employer in at least 3 of the last 5 years.
  • Contribution may be restricted to eligible employees who receive at least $600 in compensation for the tax year.
  • Employer may waive eligibility requirements.

Contribution and Limits

  • Employer: Smaller of 25% of compensation or $54,000 for 2017 and $55,000 for 2018.
  • The maximum compensation amount that can be used to calculate contribution is $270,000 for 2017 and $275,000 for 2018.

Characteristics and Highlights

  • Suitable for any business size.
  • Plan establishment and contribution can be made up until the employer’s tax return due date plus extensions.
  • Employer contributions are discretionary and tax-deductible.
  • Required minimum distributions begin at age 70 ½.

 


 

Individual 401(k) Contributions

An Individual 401(k) is a retirement plan that provides small business owners maximum flexibility and freedom to invest in alternative assets. This type of plan has two components based on your role as both employer and employee:

  • (Employee) Salary deferral, based on earned income, up to the allowed limit
  • (Employer) Profit-sharing contribution, maximum 25% of compensation, up to the allowed limit

Eligibility

  • Employer eligibility to establish plan - Any business, sole proprietor, partnership, or corporation with no employees other than you and other owners along with spouses who work for the business.
  • Taxable compensation has been received during the year.

Contribution and Limits

  • Employer: Smaller of 25% of compensation or $54,000 for 2017 and $55,000 for 2018. The maximum compensation amount that can be used for 2017 is $270,000 and $275,000 for 2018.
  • Employee: Deferral maximum of $18,000 for 2017 and $18,500 for 2018 plus an additional $6,000 for individuals age 50 and older.

Characteristics and Highlights

  • Designed for businesses with no eligible rank-and-file employees. Has the same benefits and features of a 401(k).
  • Not subject to discrimination testing since there are no rank-to-file employees
  • Total employee deferral and employer contributions may not exceed $54,000 for 2017 and $55,000 for 2018.
  • Additional employee deferrals of $6,000 for individuals aged 50 and older if the deferral limit has been met (not subject to the annual limit of $54,000 for 2017 and $55,000 for 2018).

 


 

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