SIMPLE & 401(k) Deferrals
An individual’s SIMPLE IRA and 401(k) deferral limits are intertwined. Read on to unravel the mystery.
Welcome to the Retirement Learning Center’s (RLC’s) Case of the Week. Our ERISA consultants regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans, and other types of retirement savings and income plans, including nonqualified plans, stock options, Social Security, and Medicare. This is where we highlight the most relevant topics affecting your business. A recent call with a financial advisor in Nevada is representative of a common question on elective deferral limits.
"I have a 53-year-old client who participates in a savings incentive match plan for employees (SIMPLE IRA) plan with one of his employers and a 401(k) plan with a separate employer. How much can my client defer into the SIMPLE IRA plan and 401(k) plan in the same year?”
Highlight of the discussion on elective deferral limits.
To determine the answer to your question, your client must look at
Their overall annual IRC §402(g) employee salary deferral limit and
The rule that limits employee salary deferrals to SIMPLE IRA plans under IRC § 408(p)(2)(A)(ii).
Overall, 402(g) Limit
For each tax year, IRC §402(g) limits an individual’s overall employee salary deferrals combined across all eligible plans (e.g., deferrals made to a SIMPLE IRA plan and 401(k) plan) to a set amount. For 2026, a person’s 402(g) limit is 100% of compensation up to a maximum of $24,500 if they are under age 50, and $32,500 if they are ages 50-59 and 64+, making catch-up contributions. For those ages 60-63, the 402(g) limit with super catch-up contributions is $35,750 ($24,500 + $11,250).
SIMPLE IRA Plan Limits
Generally, SIMPLE IRA plan elective deferrals are limited to 100% of compensation up to a maximum of $17,000 for 2026 or, if the participant is age 50-59 or 64+, $21,000 (which includes catch-up contributions of $4,000). For participants ages 60-63, their deferral limit is $22,250 ($17,000 + $5,250).
There is a SIMPLE small employer special contribution limit for employers with 25 or fewer employees (which also applies to employers with 26-100 participants electing to make the required higher employer contribution). (1) The SIMPLE Small Employer Special Contribution Limit is 100% of compensation up to $18,100 for 2026 or, for participants ages 50-59 or 64+, $21,950 (which includes catch-up contributions of $3,850). For participants ages 60-63, the limit is $23,350 ($18,100 + $5,250).
In the case at hand, assuming the employer has 25 or fewer employees, your client, age 53, could choose to make employee salary deferral contributions to the SIMPLE IRA plan, provided he does not exceed 100% of compensation up to $21,950 ($18,100 + $3,850). He could defer the balance of his 402(g) limit of 100% of compensation up to $32,500 to the 401(k) plan (i.e., $32,500 - $21,950 = $10,550). See IRS Publication 560 and IRS Notice 98-4, Q&A C-3. Note that your client’s overall 402(g) limit of $32,500 could be allocated as he wishes between the two plans, as long as his deferrals do not exceed $21,950 to the SIMPLE IRA plan.
Conclusion
An individual who participates in a SIMPLE IRA plan and a 401(k) plan of different employers must look at their overall 402(g) employee salary deferral limit and the rule that limits employee salary deferrals to SIMPLE IRA plans to determine the amount that can be deferred into each plan.
(1) For SIMPLE plans with 25 or fewer employees and SIMPLE plans with 26-100 participants if 4% match or 3% nonelective employer contribution provided
