Every time I think that I have a good grasp on the tax law I read something that humbles me.
Recently I read a article on SIMPLE IRA plans which surprised me. Matches must be based on a participant’s annual salary, according to IRS, even if the employee joins or leaves the plan in midyear.
For example if a worker with a salary of $60,000 joins the plan on Oct. 1 and contributes $2,000 for the rest of the year,the plan’s matching payin is $1,800...3% of $60,000 (most SIMPLEs have a 3% match). The matching contribution isn’t based on the $15,000 the employee was actually paid. If the worker in this example only put in $1,500, the match would fall to $1,500.
