A:

If there is no relationship between the two companies - the only link is that the employee works for both of them - then the employee can make salary deferral contributions up to an aggregate amount of $20,500, with no more than $13,000 to one of the SIMPLE IRAs.

The maximum aggregate contribution for an individual who reaches age 50 by the end of the year is $20,500. SIMPLE IRAs are subject to limitations established under IRCĀ§ 402(g), which limits salary deferral contributions to $15,500 for 2007. Therefore, an individual who participates in multiple retirement plans can defer no more than $15,500 for 2007 (regardless of the number of plans in which he or she participates) plus catch-up contributions of $5,000.

On the other hand, if the two companies are affiliated or related in any way - if there is any one party that has ownership of both companies, whether in part or 100% ownership - or if there is any relationship that would constitute an affiliated service group, then the maximum amount that the individual can defer to both SIMPLEs may be limited to $13,000.

To learn more, check out the SIMPLE IRA tutorial.

This question was answered by Denise Appleby (Contact Denise)

RELATED FAQS
  1. When are Simple IRA contributions due?

    Depositing SIMPLE IRA deferred compensation, matching and non-elective contributions when they are due will avoid penalties ... Read Answer >>
  2. Where can I find information on multiple annual additions for someone employed by ...

    That information can be found in Internal Revenue Code Section 402(g). Also see IRS Publication 571.If an individual participates ... Read Answer >>
Related Articles
  1. Retirement

    SIMPLE IRA Contribution Limits in 2016

    Learn the SIMPLE IRA contribution limits for 2016, with a brief summary of how the plan works, including eligibility and contribution and distribution rules.
  2. Retirement

    SIMPLE IRA Plans: Are They Really Simple?

    Contrary to what their name implies, SIMPLE IRA plans aren't always simple for an employer.
  3. Financial Advisor

    SIMPLE IRA Tutorial

    This comprehensive guide goes through what a SIMPLE IRA is, how to set one up, contribute to it and withdraw from it.
  4. Retirement

    SIMPLE IRA Vs SIMPLE 401(k) Plans

    See the differences that may cause an employer to choose one plan over the other.
  5. Retirement

    New Retirement Plan Limits for 2016

    Here's what the limits look like for 2016, compared to 2015 (the taxes you'll file in April).
  6. Retirement

    401(k) Contribution Limits in 2016

    Find out what the contribution limits are for 401(k) retirement savings plans in 2016, including individual, employer and aggregate limits.
RELATED TERMS
  1. Savings Incentive Match Plan For Employees Of Small Employers - SIMPLE

    A retirement plan that may be established by employers, including ...
  2. SIMPLE IRA

    A retirement plan that can be used by most small businesses with ...
  3. IRA Plan

    A plan that individuals may establish to arrange and plan for ...
  4. Matching Contribution

    A type of contribution an employer chooses to make to his or ...
  5. Individual Retirement Account - IRA

    An investing tool used by individuals to earn and earmark funds ...
  6. Traditional IRA

    An individual retirement account (IRA) that allows individuals ...
Hot Definitions
  1. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  2. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  3. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  4. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  5. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  6. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
Trading Center