SIMPLE IRA Plan FAQs - Compensation
Under the SIMPLE IRA plan rules, what's the definition of compensation for an individual who is not self-employed?
For an individual who is not self-employed, compensation means:
- wages, tips, and other compensation from the employer subject to income tax withholding under section 3401(a),
- amounts described in Internal Revenue Code Section 6051(a)(8), including elective contributions made under a SIMPLE IRA plan, and
- compensation deferred under a 457 plan.
Compensation doesn’t include amounts deferred under a section 125 cafeteria plan.
For purposes of applying the 100-employee limitation, and in determining whether an employee had $5,000 in compensation for any two preceding years, an employee's compensation also includes the employee's elective deferrals under a 401(k), SARSEP or 403(b) plan.
Under the SIMPLE IRA plan rules, what's the definition of compensation for a self-employed individual?
For purposes of the SIMPLE IRA plan rules, a self-employed individual’s compensation means net earnings from self-employment determined under Internal Revenue Code Section 1402(a), prior to subtracting any contributions made to the SIMPLE IRA plan for the individual.