Author Topic: Quick Question About Employer Match on a Simple IRA  (Read 2519 times)

maxpower

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Quick Question About Employer Match on a Simple IRA
« on: February 08, 2016, 03:41:46 PM »
I've googled around for this, but I can't seem to zero in on an answer! My wife just scored a new job that offers a simple IRA with a 3% match. We've never had access to this kind of thing before, so the question is this: When does the employer match hit your account? Is it dollar for dollar every pay period until they hit the 3%, or does it show up at the end of the year?

Also (and I think I know the answer to this, but I'll ask anyway just to be sure), the employer match is on top of the 12,500 that one can contribute, correct?

Any other tips for handling these kinds of investment accounts? Shoot'em my way! I'm here to learn!

Thanks!

Alex

peoria

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Re: Quick Question About Employer Match on a Simple IRA
« Reply #1 on: February 09, 2016, 09:25:07 AM »
It is generally 3% of each paycheck for the entire year.
Employer contributions do not affect the employee $12500 limit.

Simple IRA's are individually owned and managed accounts.
This usually means that if there is any fee for the management of the account, it is paid by the individual,

Having a Simple IRA plan means most likely a very small employer, which means you may be able to influence where the accounts are held at for the best fees and selections. If not, at worst, you could leave money in cash/money market at the employer chosen brokerage and roll over to a traditional IRA that has your choice of investments on a regular basis. ( if you don't like the selection available where they are contributing to

Guava

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Re: Quick Question About Employer Match on a Simple IRA
« Reply #2 on: February 09, 2016, 01:03:16 PM »
My SO has a simple IRA where the employer makes contributions at the end of every quarter. The 3% of his total pay including overtime is deposited. I don't know if this time period is normal or not.

peoria

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Re: Quick Question About Employer Match on a Simple IRA
« Reply #3 on: February 09, 2016, 01:29:40 PM »
For employee contributions (not the 3% match):

Employers must deposit employees’ salary reduction contributions to the SIMPLE IRA within 30 days after the end of the month in which the employee would have received them in cash.

For employer contributions:
They must make matching contributions or nonelective contributions by the due date (including extensions) of their federal income tax return for the year.

If your plan is subject to Department of Labor rules, you may have to deposit employees’ deferrals sooner. Generally, plans that benefit employees other than an owner-employee (and spouse) are subject to the Department of Labor rules. These rules require you to transfer your employees’ elective deferral contributions to their SIMPLE IRAs at the earliest date on which the employer can reasonably segregate the contributions from the employer’s general assets. There is a 7-day safe harbor to deposit elective deferrals for which most SIMPLE IRA plans qualify.
If you haven’t deposited salary reduction contributions to employees’ SIMPLE IRAs by the above dates, find out how you can correct this mistake.

mskyle

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Re: Quick Question About Employer Match on a Simple IRA
« Reply #4 on: February 09, 2016, 02:16:28 PM »
Totally depends on the employer - mine matches whatever I put in until it reaches 3%. So say if I had a salary of $50K and put in $1000 a month, they would match $1000 the first month, $500 the second month, and nothing the rest of the year (because 3% of $50K is $1500).

But it's probably much more common to match 3% of your actual pay each month, i.e. with the same salary and contributions I describe above, I would get a $125 match each month (3% of my $4166.66 a month salary).

peoria

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Re: Quick Question About Employer Match on a Simple IRA
« Reply #5 on: February 09, 2016, 03:09:26 PM »
Totally depends on the employer - mine matches whatever I put in until it reaches 3%. So say if I had a salary of $50K and put in $1000 a month, they would match $1000 the first month, $500 the second month, and nothing the rest of the year (because 3% of $50K is $1500).

But it's probably much more common to match 3% of your actual pay each month, i.e. with the same salary and contributions I describe above, I would get a $125 match each month (3% of my $4166.66 a month salary).

Interesting, it would seem that this would cause your employer problems if employees leave mid year.
With your example, if you left the company after 2 months, they would have contributed about 18% of your salary, which is not allowed with a Simple ira.
I wonder how they account for that?

mskyle

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Re: Quick Question About Employer Match on a Simple IRA
« Reply #6 on: February 09, 2016, 03:25:33 PM »
Totally depends on the employer - mine matches whatever I put in until it reaches 3%. So say if I had a salary of $50K and put in $1000 a month, they would match $1000 the first month, $500 the second month, and nothing the rest of the year (because 3% of $50K is $1500).

But it's probably much more common to match 3% of your actual pay each month, i.e. with the same salary and contributions I describe above, I would get a $125 match each month (3% of my $4166.66 a month salary).

Interesting, it would seem that this would cause your employer problems if employees leave mid year.
With your example, if you left the company after 2 months, they would have contributed about 18% of your salary, which is not allowed with a Simple ira.
I wonder how they account for that?

Yeah, I'm not sure - at some point, I suppose I will find out, since I won't be at this job forever and I don't see any particular reason to think I would leave precisely at the end of the calendar year! We're a small company (obviously, hence the Simple) but generally very scrupulous about benefits and banking, so I'm reasonably confident there's some kind of plan in place.

maxpower

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Re: Quick Question About Employer Match on a Simple IRA
« Reply #7 on: February 11, 2016, 03:16:58 PM »
Thanks for the responses, all. It sounds like since it varies by employer, we'll just have to wait to see.

Just had a moment to go over the fund choices, and it looks like they use Fidelity for their plan. Also seems as though there's ZERO Vanguard fund options and a lot of fees associated with the available funds. I'll definitely be exploring the option of regular roll-overs to our TD Ameritrade IRA where we can take advantage of vanguard and commission free trades!

mskyle

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Re: Quick Question About Employer Match on a Simple IRA
« Reply #8 on: February 11, 2016, 03:22:56 PM »
Ours is through Fidelity as well but I've been able to invest in their Spartan Total Stock Market Index (FSTMX/FSTVX). It was very well hidden in the fund list, but it's a decent enough index fund with fees almost as low as the corresponding Vanguard fund. Check to see if you have access to the Spartan funds (that's Fidelity's low-cost index fund brand).

maxpower

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Re: Quick Question About Employer Match on a Simple IRA
« Reply #9 on: February 11, 2016, 08:11:37 PM »
Quote
Ours is through Fidelity as well but I've been able to invest in their Spartan Total Stock Market Index (FSTMX/FSTVX). It was very well hidden in the fund list, but it's a decent enough index fund with fees almost as low as the corresponding Vanguard fund. Check to see if you have access to the Spartan funds (that's Fidelity's low-cost index fund brand).

Thanks mskyle! After a bit more digging around I noticed that myself. Looks like there's a number of commission free ishares ETFs that come pretty close to Vanguard.