Samantha Montgomery (age 42) is employed by Canon Company and is paid a salary o

Question

Samantha Montgomery (age 42) is employed by Canon Company and is paid a salary of $62,430. She has just decided to join the company's Simple Retirement Account (IRA form) and has a few questions. Answer the following for Montgomery:

a. What is the maximum that she can contribute into this retirement fund?

$

b. What would be the company's contribution?

$

c. What would be her weekly take-home pay with the retirement contribution deducted (married, 2 allowances, wage-bracket method, and a 2.3% state income tax on total wages)?

Click here to access the Wage-Bracket Method Tables.

$

d. What would be her weekly take-home pay without the retirement contribution deduction?

$

Explanation / Answer

The employer must annually choose one of the contribution methods below. The employer must tell employees during the election period which method will be used for the following year:

May reduce the 3% limit to a lower percentage, but in any event, not lower than 1%. May not lower the 3% limit for more than 2 calendar years out of the 5-year period ending with the calendar year the reduction is effective.
The employer cannot make any other contributions to a SIMPLE IRA plan.

Since the assessee aged below 50,Employee salary reduction contributions (elective deferrals)
limited to $12,500 in 2015 - 2018*

The employer must annually choose one of the contribution methods below. The employer must tell employees during the election period which method will be used for the following year:

1. 2% nonelective contribution - % of each eligible employee’s compensation regardless of whether or how much the employee deferred, or
2. 3% matching contribution - match of employee’s elective deferrals on a dollar-for-dollar basis up to 3% of the employee's compensation.

May reduce the 3% limit to a lower percentage, but in any event, not lower than 1%. May not lower the 3% limit for more than 2 calendar years out of the 5-year period ending with the calendar year the reduction is effective.
The employer cannot make any other contributions to a SIMPLE IRA plan.

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