SIMPLE IRA

What are the 2026 SIMPLE IRA limits?

SIMPLE IRA deferrals generally stop at $17,000 (2026), against $24,500 (2026) for a 401(k)401(k). A 401(k) is an employer-sponsored retirement plan funded through payroll deferrals the employee elects, usually alongside an employer contribution.Click to open the term. A higher $18,100 (2026) limit generally applies if you had 25 or fewer employees earning $5,000 or more in the preceding year, or if you have 26 to 100 and elect it by raising your match to 4% or your 2% contribution to 3%. Either route generally requires that, in the 3 years before your first SIMPLE IRA year, you kept no 401(a), 403(a), or 403(b) plan with contributions or accruals for substantially the same employees.

How does a SIMPLE IRA run through payroll?

SIMPLE IRA deferrals are a percentage of pay each employee elects, and you withhold them every pay run for the employee’s own SIMPLE IRA. An employee can stop deferring at any time, and the plan can make them wait until the next year to restart. You generally file no annual Form 5500 for the plan.

1. 01

   Set the plan up by October 1. If neither you nor a predecessor employer kept a SIMPLE IRA plan before, a new plan can take effect on any date from January 1 through October 1; a business that starts after October 1 can set one up as soon as administratively feasible.

2. 02

   Notify employees before they elect. Employees elect in the 60 days before each year and before they first become eligible; tell them beforehand which contribution you will make.

3. 03

   Withhold each pay run. Pre-tax deferrals skip federal income tax withholding but stay in Social Security, Medicare, and FUTA wages.

4. 04

   Deposit on two clocks. Deferrals are due within 30 days after the end of the month they would have been paid; your match or 2% contribution is due by your tax return due date, including extensions.

5. 05

   Report on Form W-2. Show pre-tax deferrals in box 12 with code S and in boxes 3 and 5, not box 1, and check the retirement plan box.

Can you keep a SIMPLE IRA and a 401(k) in the same year?

Generally no. A SIMPLE IRA fails for a year if, in that year or any earlier year since it took effect, you or a predecessor employer kept a qualified plan, such as a 401(k), that received contributions or accrued benefits. The law makes three exceptions: a plan covering only collectively bargained employees, when the SIMPLE IRA excludes them, a transition period after an acquisition or similar transaction, and a midyear switch to a safe harbor 401(k). That year, deferrals to both cannot exceed each plan’s limit prorated by days, combined.