Simple IRA Question
HR Mouse
53 Posts
We offer a Simple IRA (not a 401k) in which the company matches up to 3% of the participating employee's contribution through payroll. We submit the employee contributions via ACH to our plan bi-weekly on the payday. The company likes to run a report at the end of every calendar year & calculate the employee contribution amounts to figure out the match percentage per employee - then make the contribution match to the plan in December. I know with a 401k the employer is responsible for making the contributions to the plan after each payroll & I think that they are also required to make any match contributions just as often (I might be wrong on that). That being said - would we have to change the way we make our match contributions to the plan? I think the company should send the match amounts via ACH on the same day we send the employee's contribution amounts. Any ideas? Does the law cover a Simple IRA and not just 401k's?
Help! I want to make sure we are in compliance and many any necessary changes immediately!!!
Comments
From a 401k plan perspective, it is going to depend on how the plan document is written. However, general practice is to calculate and fund the match as you go along through the year. But the employer legally can wait to do the match until year end, but might have some headaches with terminated/distributed employees (if they are eligible for the match). Also this condition would have to pass the nondiscrimination tests. But it has to be written that way in the plan document and SPD so that the employees have been informed.
As for SIMPLE IRA's, I suggest you read this page from the DOL: http://www.dol.gov/ebsa/publications/simple.html. I have excerpted a small portion.
"Employer Contributions
You have two choices in determining your contributions to the SIMPLE IRA plan:
A 2 percent nonelective employer contribution, where employees eligible to participate receive an employer contribution equal to 2 percent of their compensation (limited to $225,000 in 2007 and subject to cost-of-living adjustments for later years), regardless of whether they make their own contributions.
A dollar-for-dollar match up to 3 percent of compensation, where only the participating employees who have elected to make contributions will receive an employer contribution, i.e., the matching contribution.
Each year, you can choose which one you will use for the next year’s contributions. This choice is part of the information you are required to communicate to employees before the beginning of the 60-day election period.
Depositing and Investing Plan Contributions
Employee contributions must be deposited in the financial institution serving as trustee for the plan within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. Your employer contributions must be made by the due date (including extensions) for filing your business’s Federal income tax return for the year."
But again it is going to depend on that all important plan document!