A Complex Mess: Simple IRA Maximum Contributions 2025 and Beyond

Prior to 2025, it was very easy to explain to an employee what the maximum Simple IRA contribution was for that tax year.  Starting in 2025, it will be anything but “Simple”.  Thanks to the graduation implementation of the Secure Act 2.0, there are 4 different limits for Simple IRA employee deferrals that both employees and companies will need to be aware of.

2025 Normal Simple IRA Deferral Limit

Like past years, there is a normal employee deferral limit of $16,500 in 2025. 

NEW: Roth Simple IRA Deferrals

When Secure Act 2.0 passed, for the first time ever, it allowed Roth Deferrals to Simple IRA plans. However, due to the lack of guidance from the IRS, we are still not aware of any investment platforms that are currently accepting Roth deferrals into their Simple IRA platforms. So, for now, most employees are still limited to making pre-tax deferrals to their Simple IRA plan, but at some point, this will be another layer of complexity, whether or not an employee wants to make pre-tax or Roth Simple IRA deferrals.

2025 Age 50+ Catch-up Contribution

Like in past years, any employee aged 50+ is also allowed to make a catch-up contribution to their Simple IRA over and above the regular $16,500 deferral limit.  In 2025, the age 50+ catch-up is $3,500, for a total of $20,000 for the year. 

Under the old rules, this would have been it, plain and simple, but here are the new more complex Simple IRA employee deferral maximum contribution rules for 2025+.

NEW: Age 60 to 63 Additional Catch-up Contribution

Secure Act 2.0 introduced a new enhanced catch-up contribution starting in 2025, but it is only available to employees that are age 60 – 63.  Employees ages 60 – 63 are now able to contribute the regular deferral limit ($16,500) PLUS the age 50 catch-up ($3,500) PLUS the new age 60 – 63 catch-up ($1,750).

The calculation for the new age 60 – 63 catch-up is an additional 50% above the current catch-up limit. So for 2025 it would be $3,500 x 50% = $1,750.    For employees ages 60 – 63 in 2025, their deferral limit would be as follows:

Regular Deferral:                         $16,500

Regular Age 50+ Catch-up:        $3,500

New Age 60 – 63 Catch-up:        $1,750

Total:                                              $21,750

But, the additional age 60 – 63 catch-up contribution is lost in the year that the employee turns age 64.  When they turn 64, they revert back to the regular catch-up limit of $3,500

NEW: Additional 10% EE Deferral for ALL Employees

I wish I could say the complexity stops there, but it doesn’t.  Introduced in 2024 was a new additional 10% employee deferral contribution that is available to ALL employees regardless of age, but automatic adoption of this additional 10% contribution depends on the size of the employer sponsoring the Simple IRA plan.

If the employer that sponsors the Simple IRA plan has no more than 25 employees who received $5,000 or more in compensation on the preceding calendar year, adoption of this new additional 10% deferral limit is MANDATORY, even though no changes have been made to the 5304 and 5305 Simple Forms by the IRS. 

What that means is for 2025 is if an employer had 25 or fewer employees that made $5,000 in the previous year, the regular employee deferral limit AND the regular catch-up contribution limit will automatically be increased by 10% of the 2024 limit.  Something odd to note here: The additional 10% is based just on the 2024 contribution limits, even though there are new increased limits for 2025.  (This has been the most common interpretation of the new rules that we have seen to date)

Employee Deferral Limit:    $16,500

Employee Deferral with Additional 10%: $17,600 ($16,000 2024 limit x 110%)

Employee 50+ Catch-up Limit:  $3,500

Employee 50+ Catch-up Limit with Additional 10%:  $3,850  ($3,500 2024 limit x 110%)

What this means is if an employee is covered by a Simple IRA plan in 2025 and that employer had less than 26 employees in 2024, for an employee under the age of 50, the Simple IRA employee deferral limit is not $16,500 it’s $17,600.  For employees ages 50 – 59 or 64+, the employee deferral limit with the catch-up is not $20,000, it’s $21,450. 

For employers that have 26 – 100 employees who, in the previous year, made at least $5,000 in compensation, in order for the employees to gain access to the additional 10% employee deferral, the company has to sponsor either a 4% matching contribution or 3% non-elective which is higher than the current standard 3% match and 2% non-elective.

NOTE:  The special age 60 – 63 catch-up contribution is not increased by this 10% additional contribution because it was not in existence in 2024, and this 10% additional contribution is based on 2024 limits.  The age 60 – 63 special catch-up contribution remains at $5,250, regardless of the size of the employer sponsoring the Simple IRA plan.

Summary of Simple IRA Employee Deferral Limits for 2025

Bringing all of these things together, here is a quick chart to illustrate the Simple IRA employee deferral limits for 2025:

EMPLOYER UNDER 26 EMPLOYEES

Employee Deferral Limit:   $17,600

Employees Ages 50 – 59:    $21,450

Employees Ages 60 – 63:    $22,850

Employees Age 64+:             $21,450

EMPLOYERS 26 EMPLOYEES or MORE

(Assuming they do not sponsor the enhanced 4% match or 3% non-elective ER contribution)

Employee Deferral Limit:   $16,500

Employees Ages 50 – 59:    $20,000

Employees Ages 60 – 63:    $21,750

Employees Age 64+:             $20,000

However, if the employer with 26+ employees sponsors the enhanced employer contribution amounts, the employee deferral contribution limits would be the same as the Under 26 Employees grid.

What a wonderful mess……

Voluntary Additional Simple IRA Non-Elective Contribution

Everything we have addressed up to this point focuses solely on the employee deferral limits to Simple IRA plans.  Secure Act 2.0 also introduced a voluntary non-elective contribution that employers can make to their employees in Simple IRA plans. Prior to Secure Act 2.0, the only EMPLOYER contributions allowed to Simple IRA plans was either the 3% matching contribution or the 2% non-elective contribution. 

Starting in 2024, employers that sponsor Simple IRA plans are now allowed to voluntarily make an additional non-elective employer contribution to all of the eligible employees based on the LESSER of 10% of compensation or $5,000.  This additional employer contribution can be made any time prior to the company’s tax filing, plus extensions.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.