SIMPLE IRAs and IRA Contributions: Today’s Slott Report Mailbag

Thursday, March 18, 2021

By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:

Hi,

I found you by searching to find out if we can offer two SIMPLE IRA options for our employees. I don’t know if that is something permitted. The idea is to have a cryptocurrency option set up as a SIMPLE in addition to the SIMPLE we already have in place. I’m reaching out in the hopes someone can help me with a definitive answer. I have spoken with our CPA, however, he was not sure.

Thank you for any help you can provide.

Janelle

Answer:

Janelle,

The short answer is, no, you cannot offer two different SIMPLE plans. You can offer multiple investment options within a single SIMPLE, but not two separate plans. Depending on the plan document, participants may be allowed to transfer their SIMPLE dollars to another account or custodian that offers a wider array of investment option, but that would all be under the umbrella of a single SIMPLE plan.

The longer response includes me saying that your question makes me nervous. Cryptocurrency is largely misunderstood and can be wildly volatile. Making such an investment option available to the participants in a SIMPLE plan is a possible recipe for disaster. Proper guidance is crucial for all those looking to invest. As plan sponsor, as the one who made such an investment option available, there could be some liability issues. All I ask is that you please tread carefully here.

Question:

If you max out the $58,000 to a 401(k) (personal + profit sharing), can you still contribute to a Traditional IRA an additional $6,000 as a non-deductible contribution?

Answer:

Yes. The dollars you defer into a 401(k) or other work plan (or the dollars a company contributes for you) will not limit the amount you can contribute to a Traditional or Roth IRA. Work plans can impact whether or not a Traditional IRA contribution can be deducted, but not the amount of the contribution.

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