When Do SIMPLE IRA Contributions Need to Be Made?

SIMPLE IRA contribution deadlines run on two separate clocks: employee salary deferrals must be deposited as soon as they can reasonably be segregated from company funds, with a seven-business-day safe harbor for small plans and an absolute outer limit of 30 calendar days after the end of the month the money was withheld, while employer matching or nonelective contributions are due by the due date of the business’s federal income tax return, including extensions.¹²

When Employee Salary Deferrals Must Be Deposited

Money withheld from an employee’s paycheck becomes plan assets as soon as it can reasonably be separated from the employer’s general funds.¹ The practical rule is to move it into each employee’s SIMPLE IRA on the same schedule your payroll process allows, not to wait until a deadline looms.

For plans with fewer than 100 participants, a safe harbor treats the deposit as timely if the funds reach the SIMPLE IRA within seven business days after the day the employee would otherwise have received the cash.¹ Most SIMPLE IRAs qualify, because the plan itself is limited to employers with 100 or fewer employees.

Behind the safe harbor sits a hard outer limit. Employee deferrals must be deposited no later than the 30th calendar day following the month in which the amounts would otherwise have been payable to the employee.¹ Withhold on a March 15 paycheck, and the money has to be in the account by April 30 at the latest. This 30-day figure is specific to SIMPLE IRAs; other pension plans work off a shorter 15-business-day outer limit.

If your plan permits Roth salary deferrals (an option added by the SECURE 2.0 Act), the deposit timing is identical to pre-tax deferrals.³ The tax treatment of the wages differs, but the clock on getting the money to the custodian does not.

When Employer Contributions Are Due

Employer matching and nonelective contributions run on a longer, more forgiving clock than employee deferrals. Every year you pick one formula: a dollar-for-dollar match of employee deferrals up to 3% of compensation, or a flat 2% nonelective contribution for every eligible employee whether they defer or not.⁴

Either type of employer contribution must be deposited no later than the due date of the business’s federal income tax return for that year, including extensions.² The statute cross-references IRC Section 404(m)(2)(B), which treats a contribution as timely if it is made on account of the taxable year and deposited before the extended filing deadline.⁵ For a calendar-year business, that generally means mid-March or mid-April depending on entity type, or the following September or October if you extend.

Meeting this deadline also determines whether you can deduct the contribution for the tax year it was earned. Miss it, and the deduction slides into the next year at best, or is lost.

Deadlines for Self-Employed Contributions

Sole proprietors and partners do not draw a regular paycheck, so the two clocks split apart in a way that catches people off guard. Your own salary reduction contributions must be deposited within 30 days after the end of the tax year. On a calendar year, that means January 30 of the following year, and the date does not move if you extend your return.⁶

Your employer contributions (matching or nonelective) get the same extended deadline any business does: the due date of your federal income tax return, including extensions. For most sole proprietors, that is April 15, or October 15 with an extension on file.⁶ Since final net earnings often are not known until you prepare the return, this longer window is what lets you calculate the correct amount.

What Happens If You Deposit Late

A late salary deferral deposit is treated as a prohibited transaction under federal law, and the consequences involve both the Department of Labor and the IRS. They also grow the longer the money sits in your operating account.

Excise Tax

The IRS imposes an excise tax of 15% of the “amount involved” for each year or partial year the prohibited transaction stays uncorrected. For late salary deferrals, the amount involved is generally based on the lost earnings on the delayed deposits rather than the full contribution. If the violation is still uncorrected at the end of the taxable period, an additional tax of 100% of the uncorrected amount applies.⁷ You report and pay the tax on IRS Form 5330.

Lost Earnings

You also have to make employees whole. That means depositing the missed contributions plus the earnings they would have received had the money been invested on time. The DOL runs an online calculator that uses the IRS underpayment interest rate with daily compounding to compute the correction.⁸

Fixing It Through the VFCP

The DOL’s Voluntary Fiduciary Correction Program is the structured path for late deposits. You identify the violation, calculate and restore lost earnings, and file an application with the Employee Benefits Security Administration.⁹ Completing the process can provide relief from certain DOL enforcement actions.

Deadlines for Setting Up the Plan and Sending the Annual Notice

Deposit deadlines assume you have a plan in place, and setup has its own calendar. An existing business must establish a SIMPLE IRA between January 1 and October 1 of the year the plan takes effect, giving employees enough of the year left to make deferrals. A business that starts after October 1 can set up a SIMPLE IRA as soon as administratively feasible after operations begin.¹⁰

Before each plan year, you must give every eligible employee a written notice during the 60-day election period, which generally runs from November 2 through December 31.¹⁰ The notice has to cover the employee’s right to start, change, or stop deferrals for the coming year; whether you will make matching or nonelective contributions and in what amount; and a plain-language summary description of the plan, typically supplied by the financial institution holding the accounts.¹¹ Missing the notice does not automatically disqualify the plan, but it is a compliance failure that may need to be corrected through the IRS’s formal correction programs to preserve the plan’s tax-favored status.

1
eCFR. 29 CFR 2510.3-102 – Definition of Plan Assets Participant Contributions
2
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
3
Internal Revenue Service. SECURE 2.0 Act Changes Affect How Businesses Complete Forms W-2
4
Internal Revenue Service. Retirement Topics – SIMPLE IRA Contribution Limits
5
Office of the Law Revision Counsel. 26 USC 404 – Deduction for Contributions of an Employer
6
Internal Revenue Service. SIMPLE IRA Tips for the Sole Proprietor
7
Office of the Law Revision Counsel. 26 USC 4975 – Tax on Prohibited Transactions
8
U.S. Department of Labor. Voluntary Fiduciary Correction Program (VFCP) Online Calculator
9
U.S. Department of Labor. Voluntary Fiduciary Correction Program
10
Internal Revenue Service. Retirement Plans FAQs Regarding SIMPLE IRA Plans
11
Internal Revenue Service. Annual SIMPLE IRA Plan Notification Requirements