So here are the numbers for 2015: If a company currently has a SIMPLE IRA plan, the employee can defer up to $12,500/yr., plus an additional $3,000 if they are over age 50. The employer can choose to make a 2% non-elective contribution (more about this at the IRS website ) or match employee contributions, up to 3% of compensation
SIMPLE IRA Summary: The absolute maximum combined employer and employee contribution is $31,000
In a variation of a 401k plan, you can defer up to $18,000, plus an additional $6,000 if you are over age 50. Employers can contribute additional funds, such as matching contributions and profit sharing.
401k Summary: The absolute maximum combined employer and employee contribution is $59,000
This can all be fully tax deductible if you wish.
For those that have a SIMPLE IRA plan in place now, and want to switch to a 401k, here are items to consider:
-You cannot maintain a SIMPLE IRA and 401k in the same calendar year
-Employees must be given notice 60 days in advance of this type of change (November 1 for a January 1 switch)
If you think you may benefit from making this switch for next year, now is the time to do the math.