How does the SIMPLE IRA employer match work?

Two employer choices

A SIMPLE IRA plan has two kinds of money going in. The employee’s salary reduction contribution is the employee’s choice. The employer’s contribution is not optional: Publication 560 says you, as the employer, must make either matching contributions or nonelective contributions, and no other contributions can be made to the plan. (The publication adds that additional nonelective contributions have been allowed under SECURE 2.0 for tax years beginning after 2023.)

Which you pick matters because the two formulas behave very differently. The match rewards employees who participate. The nonelective contribution reaches everyone, including employees who never defer a dollar.

The 3% match

The standard match is dollar for dollar on what the employee defers, up to 3% of the employee’s compensation. Only employees who elected to make salary reduction contributions receive it. If an employee defers 1% of pay, the match is 1% of pay. If the employee defers 3% or more, the match stops at 3%. An employee who defers nothing gets nothing from the match.

The publication’s own example shows the arithmetic. An employee earned $25,000 in 2025 and chose to defer 5%. Salary reduction was $1,250 ($25,000 × 5%) and the employer match was $750 ($25,000 × 3%), so $2,000 went in. The calculator above reproduces that case when you enter $25,000 and 5%.

Compensation here has its own special SIMPLE definition: wages subject to income tax withholding, plus the employee’s salary reduction contributions and certain other deferrals. For a self-employed owner it is net earnings from self-employment (Schedule SE, line 4) before subtracting contributions made to the plan for yourself.

Cutting the match below 3%

You may choose a match lower than 3%, but the percentage must be at least 1%. You must notify employees of the lower match within a reasonable time before the 60-day election period for the year. And you cannot choose less than 3% for more than 2 years during the 5-year period that ends with, and includes, the year the choice applies. A lower match can therefore be a temporary tool, not a permanent design.

For example, with a 1% match and an employee earning $40,000 who defers 4% ($1,600), the match is only $400 (1% of pay), not $1,200.

The 2% nonelective alternative

Instead of matching, the employer can contribute 2% of compensation for each eligible employee who has at least $5,000 (or any lower amount you select) of compensation for the year. It is paid whether or not the employee defers. Only the first $350,000 of an employee’s compensation counts in 2025 ($360,000 in 2026). Employees must be told within a reasonable time before the 60-day election period.

The publication’s example: an employee earned $36,000 in 2025 and deferred 10% ($3,600). The 2% nonelective contribution was $720, for $4,320 in total. A second example shows a $75,000 earner whose combined contribution tops out at $14,000: the $12,500 deferral shown there plus 2% of $75,000 ($1,500). That $12,500 deferral figure is the publication’s illustration; the actual 2025 deferral limit is $16,500 for most participants.

The dollar limits

Salary reduction contributions generally cannot exceed $16,500 for 2025 and $17,000 for 2026. A participant age 50 or older at the end of the calendar year can add catch-up contributions, generally $3,500 for 2025 and $4,000 for 2026. In 2025 and 2026, participants who reach age 60, 61, 62 or 63 can make a higher catch-up of $5,250. The SECURE 2.0 Act also allows a higher salary reduction limit for participants in SIMPLE plans of certain employers, but the publication prints two different 2025 figures for it ($18,100 in What’s New and $17,600 in chapter 3), so check IRS.gov for the current number if that applies to you. Our SIMPLE IRA limits page goes deeper on the limits themselves.

When the money must be deposited

Employee salary reduction contributions must be deposited within 30 days after the end of the month in which the money would otherwise have been paid to the employee in cash. Matching and nonelective contributions are due by the due date of the employer’s federal income tax return for the year, including extensions. For 2025 the publication gives Monday, April 15, 2026 as the usual due date. Employer contributions are deductible, and SIMPLE matches and nonelective contributions to a traditional SIMPLE IRA are not subject to Social Security, Medicare or FUTA tax, though employees’ salary reduction contributions are.

Sources

• IRS Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (2025): Chapter 3, SIMPLE IRA Plan, Contribution Limits (salary reduction, catch-up, employer matching and nonelective contributions, time limits). Read November 2, 2026.

Edition read: Publication 560 (2025), for use in preparing 2025 returns. Where the publication gives 2026 figures, this page labels them 2026. Dollar limits change every year; check the current publication and form instructions for your plan year. This page summarizes the publication and does not replace it.