Can I Have More Than One SIMPLE IRA Account?

The SIMPLE (Savings Incentive Match Plan for Employees) IRA allows small companies to set up a retirement account for their employees. Both employers and employees can make contributions to the plan; tax on the gains is deferred until you reach retirement age and begin withdrawals. In the meantime, the IRS excludes the contributions from your taxable income, up to a maximum exclusion amount.

Multiple Accounts

You may have more than one SIMPLE account, as long as your various employers have no legal or corporate relationship. The IRS will defer taxes on the gains in the accounts until you begin taking distributions. In addition, the money you contribute to the accounts is excluded from the income your employer reports to the IRS. However, the IRS limits the exclusion on these contributions.

Exclusion Limits

As of the time of publication, the exclusion limit is $11,500 for a single account; this limit rises to $14,000 if you are 50 years of age or older. The IRS limits you to a $16,500 for all SIMPLE accounts, if you have more than one. The exclusion amounts are subject to annual review and a cost-of-living adjustment. Your employer is not responsible for keeping track of your contributions to a SIMPLE IRA set up with another employer. If you attempt to have income excluded over the annual limit, you will be subject to an IRS audit and fines.

IRS Guidelines

The IRS limits the size of companies that may establish SIMPLE IRA accounts. They may have no more than 100 employees who earn $5,000 or more in a calendar year. In addition, you may not have more then one account with a single employer. Companies that contribute to another active pension or retirement plan may not contribute to a SIMPLE account in the same year.

Withdrawals and Distributions

If you take a distribution from a SIMPLE IRA within two years after you enroll in the plan, then the IRS levies a 25 percent early-withdrawal penalty. If you make a withdrawal after this period but before you reach age 59 and 1/2, you are subject to the early-withdrawal penalty of 10 percent. The other rules applicable to withdrawals from conventional IRAs also apply to SIMPLE IRAs.