SIMPLE-IRA Contribution Limits

Employee Contributions

Eligible employees can elect to contribute up to 100% of compensation through salary reduction, up to a maximum of $10,500 for the 2008 plan year. The amount elected by the employee may be expressed as a percentage of compensation or as a specific dollar amount.

Additionally, participants age 50 and older in 2008 may be able to make an additional annual $2,500 catch-up elective deferral contribution to their SIMPLE-IRA.

Employer Contributions

Employers can choose from two different contribution methods and can even switch between these options each year, provided certain notification requirements are met:

• Matching option - Requires the employer to match each participant's contributions dollar-for-dollar up to 3% of compensation but no more than $10,500 for the 2008 plan year. Also allows the employer to reduce the employer's match to as little as 1% of each participant's compensation for any two years in a five-year period.
• Non-elective contribution option - Requires the employer to contribute 2% of each eligible employee's compensation each year up to a maximum of $4,600 for the 2008 plan year regardless of whether the participant contributes or not. The maximum annual compensation on which contributions can be based is $230,000 for 2008.