What is the SIMPLE IRA contribution limit for 2026?

For 2026, employees can defer up to $16,500 of salary into a SIMPLE IRA — same as 2025. The catch-up at age 50+ is $3,500. SECURE 2.0's super catch-up for ages 60-63 is $5,250 in 2026. Employers must contribute either a 3% dollar-for-dollar match (only for employees who defer) OR a 2% non-elective contribution for ALL eligible employees. Maximum employer-counted compensation: $360,000.

Who is eligible for a SIMPLE IRA?

Two eligibility tests must both pass. The BUSINESS must have 100 or fewer employees who earned at least $5,000 in any of the prior two years (and no other retirement plan in the same year). The EMPLOYEE must have earned at least $5,000 in any 2 prior years AND be expected to earn at least $5,000 in the current year — though employers can lower these thresholds in the plan document. Owners are always eligible. There's no age requirement (unlike SEP's age-21 rule).

What's the SIMPLE IRA 2-year rule?

SIMPLE IRA contributions cannot be rolled to a Traditional IRA, Roth IRA, or 401(k) for 2 YEARS from the date of the first contribution to YOUR specific SIMPLE IRA account. Withdrawals during this 2-year window are subject to a 25% early withdrawal penalty (vs 10% for regular IRAs). After 2 years, normal IRA rollover rules apply. The 25% penalty is unique to SIMPLE IRA and is one of the plan's biggest user-experience drawbacks.

Is a Roth SIMPLE IRA available?

Yes, since 2023 (SECURE 2.0 §601). Employees can elect to designate their salary deferrals as Roth contributions instead of Traditional pre-tax. Employer contributions can also be designated Roth (taxable to the employee in the year of contribution). Adoption is uneven — many SIMPLE IRA providers haven't fully rolled out the Roth option, so check with your plan custodian. Vanguard, Fidelity, and Schwab now support it.

SIMPLE IRA vs SEP IRA — which should a small business choose?

If you're a sole proprietor with no employees, SEP wins on simplicity and contribution ceiling ($72K vs effectively $20-30K total). If you have employees, SIMPLE almost always wins because it splits funding costs (employees defer their own deferrals, employer matches just 3%) instead of forcing the SEP's proportional-contribution rule (employer pays the full percentage for everyone). Cross the 100-employee threshold and you must move to a 401(k).

When is the SIMPLE IRA setup deadline?

SIMPLE IRAs must be established by October 1 of the plan year. If you start a new business after October 1, you can establish a SIMPLE IRA 'as soon as administratively feasible.' Miss the October 1 cutoff for an existing business and you wait until next January. Once established, employees must be given a 60-day election window each year (typically Nov 2 through Dec 31) to choose their deferral percentage for the next year.

Can I have a SIMPLE IRA AND a 401(k) from another job?

Yes, but the elective deferral cap is per-person across ALL workplace plans. Your $16,500 SIMPLE IRA deferral counts against the same cap as a 401(k) deferral. If you defer $16,500 into a SIMPLE IRA from a side business and $24,500 into a W-2 401(k), you've over-contributed — the IRS limit on combined elective deferrals from multiple employers is $24,500 for 2026. The employer matching contributions on each plan are NOT subject to this combined cap, only employee elective deferrals.

Updated for 2026

SIMPLE IRA

Q: Does the employer have to contribute every year?

Yes — that's the SIMPLE part. Each year the employer chooses ONE of two contribution methods: (1) 3% dollar-for-dollar match on employee deferrals (no match for non-deferrers), OR (2) 2% non-elective contribution to ALL eligible employees regardless of whether they defer. The 3% match can be reduced to 1% in 2 of every 5 years. The non-elective 2% has a $360K compensation cap for 2026 (so max non-elective per employee is $7,200).

$16,500 employee deferral plus 3% match or 2% non-elective in 2026. Small-business retirement plan for 1-100 employees with no Form 5500 paperwork.

2026 SIMPLE IRA Key Numbers

Employee Deferral

$16,500

Catch-up at 50+

$3,500

Super Catch-up (60-63)

$5,250

Employer Match

3% or 2%

Employer must choose: (1) dollar-for-dollar match up to 3% of employee compensation, OR (2) 2% non-elective contribution to ALL eligible employees. Setup deadline: October 1 of the plan year.

Source: IRS SIMPLE IRA Plan Page · IRS Publication 560 · IRC §408(p).

What is a SIMPLE IRA?

A SIMPLE IRA — Savings Incentive Match Plan for Employees IRA — is a small-business retirement plan that splits funding between employer and employee. Employees defer their own salary into the plan (up to $16,500 in 2026); the employer must add either a matching contribution (3%) or a non-elective contribution (2% for everyone). It's designed for businesses with 1-100 employees that don't want the complexity of a .

SIMPLE IRAs sit between SEP IRAs (employer-only contributions, simplest admin, highest cap) and plans (highest contribution limit, full ERISA compliance, expensive admin). For a 5-20 person business, SIMPLE typically delivers the best cost-per-benefit balance — employees get to fund their own retirement deferrals (real savings tool), employer mandate is capped at 3% of payroll, and there's no Form 5500 or annual nondiscrimination testing.

The two notable downsides: the 2-year rule (25% early-withdrawal penalty if you withdraw within 2 years of your first contribution to YOUR account, vs the 10% penalty for regular IRAs and s), and the inability to combine SIMPLE with any other retirement plan in the same year (no 401(k) on top, no SEP on top).

How SIMPLE IRA contributions work

EMPLOYEE SIDE

1.Choose a deferral percentage (or fixed dollar) up to $16,500/yr.
2.Add $3,500 catch-up at 50+, or $5,250 at 60-63 (SECURE 2.0 super catch-up).
3.Choose Traditional pre-tax OR Roth (post-SECURE 2.0). Most plan custodians now support Roth.
4.2-year rule: 25% early-withdrawal penalty for 2 years from first contribution.

EMPLOYER SIDE

1.Pick ONE method per year: 3% match (only for deferrers) OR 2% non-elective (for all eligible).
2.3% match can drop to 1% in 2 of every 5 years (employer flexibility).
3.2% non-elective is capped at 2% of $360K compensation = $7,200 max per employee.
4.Notify employees by November 2 of the upcoming year's contribution method.

When SIMPLE IRAs make sense

You run a small business with 1-100 employees

SIMPLE IRAs are restricted to businesses with 100 or fewer employees who earned at least $5,000 in any of the prior two years. Above 100 employees you graduate to a . The 100-employee cap includes the owner. SIMPLE plans are explicitly designed for the gap between sole-prop SEP/Solo 401(k) and full-blown 401(k) plans — small enough to skip the Form 5500 paperwork, structured enough to require employer contributions.

You want employees to fund most of their own retirement

SIMPLE IRAs split the cost: employees defer their own salary (up to $16,500 in 2026), employer adds either a 3% matching contribution OR a 2% non-elective contribution for everyone. SEP IRA flips the entire bill onto the employer. For a small business with 5-20 staff who want retirement, SIMPLE IRA usually costs the employer 3% of payroll vs the 15-20% a SEP would require.

You can't or won't run a 401(k)

plans require Form 5500 filings, ERISA compliance, annual nondiscrimination testing (ADP/ACP), and typically third-party administration costing $2,000-$5,000/year minimum. SIMPLE IRAs have none of these — no 5500, no testing, no TPA required. The trade-off is the lower contribution ceiling ($16,500 vs $24,500) and the 2-year early-withdrawal penalty (25% vs 10%).

You're hiring your first 1-2 employees

If you're a sole prop with one or two new hires, SIMPLE IRA is often the right step up from your existing SEP. SEP's proportional-contribution rule means contributing 20% to yourself requires 20% for each employee — frequently $20K+ per employee per year. SIMPLE caps the employer cost at 3% match (employee must defer to trigger) or 2% non-elective for everyone.

You opened the plan after October 1

SIMPLE IRAs must be established by October 1 of the plan year for the contributions to count for that year. Miss the deadline and you wait until January 1 of the next year. Solo is the only self-employment plan with a Dec 31 elective-deferral deadline; SEP IRA is the most forgiving (Oct 15 with extension). If you're scrambling in November-December, your only option is SEP for the current year + SIMPLE setup for next year.

Worked examples

Three contribution scenarios showing employer cost vs employee benefit.

EXAMPLE 1 — Owner + 3 employees, 3% match method

Owner salary $200K, defers $16,500: + $6,000 employer match
Employee A salary $80K, defers $4,800 (6%): + $2,400 match
Employee B salary $60K, defers $1,800 (3%): + $1,800 match
Employee C salary $50K, defers $0: $0 (no match without deferral)
Total employer cost: $10,200
As % of total payroll ($390K): 2.6%

3% match is cheaper when employees don't all defer. Employee C contributes nothing → owner avoids matching.

EXAMPLE 2 — Same business, 2% non-elective method

Owner $200K → 2% × $200K: $4,000
Employee A $80K → 2% × $80K: $1,600
Employee B $60K → 2% × $60K: $1,200
Employee C $50K → 2% × $50K (no deferral required): $1,000
Total employer cost: $7,800
As % of total payroll: 2.0%

2% non-elective costs $2,400 less in this scenario because Employee A's match would have been $2,400 (3% of $80K). Choose method based on expected deferral participation.

EXAMPLE 3 — Sole prop owner, $100K SE income, age 55

Net SE income: $100,000
SIMPLE deferral (employee-side): $16,500
Catch-up at 50+: $3,500
Employer match (3% × adjusted comp ~$92K): $2,769
Total annual contribution: $22,769
Solo 401(k) alternative would allow: ~$50,000+

Sole props with no employees usually shouldn't pick SIMPLE — Solo 401(k) doubles the contribution ceiling at the same income.

SIMPLE IRA vs SEP IRA vs Solo 401(k)

	SIMPLE IRA	SEP IRA	Solo 401(k)
Best for	1-100 employee small biz	Sole prop, late filers	Solo + max contribution
Employee deferral cap	$16,500	N/A (no deferrals)	$24,500
Employer share cap	3% match or 2% non-elective	25% × comp, max $72K	25% × comp, max $72K total
Catch-up (50+)	$3,500 (or $5,250 at 60-63)	None	$8,000 (or $11,250 at 60-63)
Roth option?	Yes (post-SECURE 2.0)	No (pending)	Yes
Early withdrawal penalty	25% (first 2 years)	10%	10%
Setup deadline	October 1	Tax filing + extensions	Dec 31 (deferrals)
Form 5500 required?	No	No	Yes (5500-EZ if > $250K)

Compare small-business retirement plans

SIMPLE IRA is one of three main self-employment + small-business retirement vehicles. Run your numbers on each before locking in a plan for next year.

SEP IRA guide →Solo 401(k) guide → 1099 / SE tax calculator →2026 contribution limits →Self-employment tax rate (15.3%) →