Retirement Plan FAQs Regarding Contributions-How much can I contribute to my self-employed SEP plan if I participate in my employer’s SIMPLE IRA plan?
The contribution limits for your SIMPLE IRA plan are separate from the limits for your SEP plan. Assuming you are not also an owner of your employer’s business, you can contribute the maximum to both plans.
SIMPLE IRA plan limits
You can make salary deferrals (salary reduction contributions) of up to $12,000 to a SIMPLE IRA plan (in 2014, $12,500 in 2015). If you’re age 50 or over, you can contribute an additional $2,500 (in 2014, $3,000 in 2015) in catch-up contributions.
If you participate in more than one retirement plan (such as a 401(k) or a 403(b) plan) that allows you to make salary deferrals, your total employee contributions to all plans can’t exceed your personal limit of $17,500 (in 2014, $18,000 in 2015), plus an additional $5,500 (in 2014, $6,000 in 2015) if you're age 50 or older. However, because the SIMPLE IRA plan limits your contributions to $12,000, plus an additional $2,500 catch-up contribution, this is the maximum amount you can contribute to your SIMPLE IRA plan in 2014 ($15,500 in 2015).
Your employer must either:
- match your salary deferrals, on a dollar-for-dollar basis, up to 3% of your compensation, or
- make a nonelective contribution of 2% of your compensation (taking into account no more than $260,000 of compensation in 2014 ($265,000 in 2015)).
SEP plan limits
Your contributions to your SEP plan (that is not a SARSEP) are not reduced by the contributions you or your employer make to your employer’s SIMPLE IRA plan.
SEP plans (that are not SARSEPs) only allow employer contributions. For a self-employed individual, contributions are limited to 25% of your net earnings from self-employment (not including contributions for yourself), up to $52,000 (for 2014, $53,000 for 2015). You can calculate your plan contributions using the tables and worksheets in Pub. 560.
If your business sponsors another defined contribution plan in addition to your SEP plan (for example, a profit-sharing plan or a 401(k) plan), then your contributions for yourself to all these plans may not exceed 25% of your net earnings from self-employment (not including contributions for yourself), up to $52,000 (for 2104, $53,000 for 2015). Note that salary deferrals are not subject to the 25% limit and catch-up contributions are not subject to the $52,000 limit.
- SEP Plans
- SIMPLE IRA Plans
- How much salary can you defer if you're in more than one retirement plan?
- Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)
- Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)