Basic Limit

• Employees may elect to contribute to their SIMPLE IRA plan on a before-tax basis through deductions to their gross earnings. For 2010 and 2011, the IRS set the limit for employee contributions at $11,500. The federal tax code requires the IRS to adjust the contribution limit for SIMPLE IRAs and other retirement plans according to the cost-of-living on a yearly basis as necessary.
  
  

Higher Limit

• Some employees may contribute more than the basic limit to their SIMPLE IRA each year: The IRS grants a "catch-up" contribution to employees who are age 50 or older. For these employees, the catch-up contribution was $2,500 in 2010 and 2011, for a total allowable contribution of $14,000. The catch-up contribution is permissible at the discretion of the employer or other plan administrator.
  
  

Additional Considerations

• Employees also can receive contributions to their SIMPLE IRA in the form of employer matching, which, for each employee, may be a dollar-for-dollar match of up to 3 percent of the employee's gross compensation. Employees may have an opportunity to contribute to more than one employer-based retirement plan--if, for example, they work two jobs, and one offers a 401k while another offers a SIMPLE IRA. In this case, the employee's total contributions to all plans may not exceed $16,500 in 2010 and 2011.
  
  

Plan Comparison

• The standard employer-based retirement plans, such as 401k and 403b plans, have higher limits than SIMPLE IRA plans. In 2010 and 2011, employees could contribute $16,500 annually to these plans, with catch-up contribution limits of $5,500. The 457 plan for employees of government agencies and certain tax-exempt organizations also has a basic contribution limit of $16,500.
  
  

Limit History

• The annual limit for SIMPLE IRA contributions has almost doubled since the plan originated in 1997. In that year, the contribution limit was $6,000. It remained at that level until 2001, when it rose to $6,500, and continued increasing each year to $10,000 in 2005. It moved to $10,500 in 2007 and has been at $11,500 since 2009. The catch-up contribution has been $2,500 since 2006.