SIMPLE IRA Contribution Calculator (Match vs. Non-Elective Comparison)

A SIMPLE IRA (Savings Incentive Match Plan for Employees) sits between a SEP-IRA and a 401(k) in both complexity and contribution room. Like a 401(k), employees (including a self-employed owner covering themselves) can defer their own salary into the account. Like a SEP-IRA, the setup and ongoing administration are lighter than a full 401(k), with no Form 5500 filing requirement and a simpler adoption process. The tradeoff is a lower employee deferral ceiling than a 401(k), and an employer contribution that must follow one of exactly two formulas, chosen once per year and applied uniformly across the whole plan, not customized employee by employee.

Those two formulas produce meaningfully different results depending on who is deferring how much, which is why this calculator always computes both side by side rather than assuming one is obviously better.

Employee elective deferral. The 2026 standard limit is $17,000. SECURE 2.0 allows a higher limit, $18,100 for 2026, for SIMPLE plans sponsored by employers with 25 or fewer employees (automatically), or by employers with 26 to 100 employees who elect an enhanced employer-contribution formula. On top of either deferral limit, a standard catch-up of $4,000 applies at age 50 or older, or an enhanced $5,250 "super catch-up" applies for anyone who turns 60, 61, 62, or 63 during the year (replacing, not stacking with, the standard catch-up). For a self-employed sole proprietor covering themselves, "compensation" for these purposes is net earnings from self-employment, meaning net profit reduced by the deductible one-half of self-employment tax, the same adjustment used for a Solo 401(k) or SEP-IRA.

Employer contribution, Method A: dollar-for-dollar match. The employer matches whatever the employee defers, dollar for dollar, up to 3% of the employee's compensation. An employee who defers nothing receives no match under this method; the employer's total cost scales directly with employee participation.

Employer contribution, Method B: flat 2% non-elective. The employer contributes a flat 2% of every eligible employee's compensation, regardless of whether that employee defers anything at all, computed on compensation capped at the IRC Sec. 401(a)(17) limit ($360,000 for 2026). This method costs the employer more when participation is low and can cost less than a full 3% match when participation is high.

Which method produces a bigger contribution for a given person depends entirely on how much they defer relative to 3% of their compensation. Defer more than 3% of pay, and the match (worth up to 3% of pay) usually beats the flat 2%. Defer less than roughly 2/3 of what 3% of pay would be, and the flat 2% non-elective can come out ahead instead, since it doesn't depend on the deferral amount at all.

A 45-year-old sole proprietor with $100,000 in net self-employment income, no catch-up (under 50), standard deferral limit, deferring the full statutory maximum.

Compensation base. Net earnings from self-employment: self-employment tax on $100,000 comes to $14,129.55, half of that ($7,064.78) is deductible, leaving $92,935.22.

Employee deferral. The 2026 standard limit is $17,000, well under the $92,935.22 in net earnings, so the full $17,000 is used.

Match method. 3% of $92,935.22 is $2,788.06. Since the $17,000 deferral exceeds that, the match caps at $2,788.06. Total: $17,000 + $2,788.06 = $19,788.06.

Non-elective method. 2% of $92,935.22 is $1,858.70. Total: $17,000 + $1,858.70 = $18,858.70.

In this case the match method wins by $929.36 for the year, because this participant defers well above the 3%-of-compensation threshold where the match caps out. Growing the match-method total of $19,788.06 every year at an assumed 7% return from an empty account, the balance after two years reaches $40,961.28.

For a solo business owner covering only themselves, the choice is straightforward: run both numbers (this calculator does it automatically) and pick whichever is larger, since there's no other employee whose incentives to defer more or less come into play. For a business with multiple employees, the decision is more strategic. The non-elective 2% guarantees every eligible employee gets a contribution, useful for recruiting and retention among employees who might not defer much on their own. The match rewards and encourages higher deferral rates, but costs the employer nothing for employees who opt out entirely, which can make total employer cost lower in a workforce with uneven participation.

• Assuming the match is automatically better. Whether the match or the flat 2% produces more total money depends entirely on the deferral rate relative to 3% of compensation; this calculator computes both explicitly rather than assuming.
• Missing that the employer formula applies to the whole plan, not per employee. An employer cannot offer some employees the match and others the non-elective contribution in the same plan year; one formula applies uniformly.
• Confusing the standard and SECURE 2.0 higher deferral limits. The $18,100 higher limit only applies to specific employer sizes and plan elections; defaulting to it without checking eligibility overstates what's actually allowed.
• Forgetting the mid-year formula-change notice requirement. An employer generally must notify employees of the SIMPLE IRA's contribution formula before the start of the plan year; switching formulas requires advance notice, not a same-year change.
• Treating SIMPLE IRA and 401(k) catch-up amounts as identical. They are not; the SIMPLE IRA's standard catch-up ($4,000 for 2026) and super catch-up ($5,250) are both lower than the corresponding 401(k) figures ($8,000 and $11,250).

• Two-year withdrawal restriction. SIMPLE IRA funds withdrawn within the first two years of participation are subject to a steeper 25% early-withdrawal penalty (versus the standard 10%) if not rolled over correctly; this calculator models growth, not withdrawal penalties.
• Multiple eligible employees. This calculator models one participant's contribution; a business with several eligible employees needs to budget the chosen employer formula across everyone, not just the owner.
• Plan setup and custodian costs. SIMPLE IRA administration and investment fees are not modeled.
• Employer's ability to reduce the match in a lean year. A SIMPLE IRA match can be reduced below 3% (to as low as 1%) in no more than 2 of any 5 consecutive years with advance employee notice; this calculator assumes a consistent formula across the full projection horizon.

• Internal Revenue Service, "401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500," irs.gov/newsroom, IRS Notice 2025-67 (SIMPLE IRA figures).
• Internal Revenue Service, COLA Increases for Dollar Limitations on Benefits and Contributions (401(a)(17) compensation limit, 2026).
• Internal Revenue Service, Publication 560, "Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)," Chapter 3, SIMPLE IRA Plans.
• SECURE 2.0 Act of 2022, Sec. 117 (higher SIMPLE deferral limit for small employers) and Sec. 109 (age 60-63 enhanced catch-up).