Simple IRA contributions include salary reduction contributions and employer contributions which contain either matching contributions or nonelective contributions. There are no other contributions can be made to a simple IRA plan. Then, the amount the employee contributes to a simple IRA cannot exceed $ 11,500 for 2010 and 2011. If an employee participates in any other employer plan during the year and has elective salary reductions under those plans, the total amount of the salary reduction contributions that an employee can make to all the plans he or she participates in is limited to $ 16,500 for 2010 and 2011. If permitted by the simple IRA plan, participants who are age 50 or over at the end of the calendar year can also make catch-up contribution. Moreover, the catch-up contribution limit for simple IRA plans for 2010 and 2011 is $ 2,500.

The employer is also generally required to match each employee’s salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee’s compensation. This requirement will not apply if the employer makes nonelective contributions instead. An employer may also choose to make a matching contribution less than 3%, but it must be at least 1% and for no more than 2 out of 5 years. The employer have to notify the employees of the lower match within a reasonable period before the 60-day election period for the calendar year. Instead of matching contributions, an employer can decide to make nonelective contributions of 2% of each eligible employee’s compensation. If the employer makes this choice, it must make nonelective contributions whether or not the employee chooses to make salary reduction contributions and then an employee’s compensation up to $ 245,000 (for 2010 and 2011) is taken into account to figure the contribution limit. If the employer chooses this 2% contribution formula, it must also notify the employees within a reasonable period before the 60-day election period for the calendar year.

The 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. They have to make matching contributions or nonelective contributions by the due date (including extensions) of their federal income tax return for the year. For many years, the contribution limit for an IRA stood at $ 2,000, but policymakers realized that inflation made this old limit inadequate in meeting the retirement planning needs of individuals.  Then, if you are using IRAs to fund retirement, we have some good news about the 2010 and 2011 limits.

In 2010, the employer salary-reduction contribution that applies to simple IRAs remained at $11,500.  If you are workers that are age 50 and older, your employer can make additional “catch up” contributions of $2,500, bringing the total contribution limit in 2010 for simple IRAs to $14,000.  Moreover, in 2011, the employer salary-reduction contribution remains at $11,500, keeping the total contribution limit at $14,000. In 2011, the following income limit rules apply to Roth IRAs: First, single filers with modified adjusted gross income up to $107,000 can make a full contribution.  If your adjusted gross income is in excess of $122,000, then you cannot make a contribution to a Roth IRA. Second, joint filers with modified adjusted gross income up to $169,000 can make a full contribution. If your adjusted gross income is in excess of $ 179,000, then you cannot make a contribution to a Roth IRA in 2011.

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