The official IRS website is a fantastic resource for SIMPLE IRA contribution limits and plan information; for the 2015 tax year, the contribution limit for employee contributions is $12,500, as stated by the IRS website. If an individual is 50 years of age or older, he or she can make an additional catch up contribution of $3,000 for the 2015 tax year.
A SIMPLE IRA plan is established by an individual's employer. The employer must either make matching contributions or non-elective contributions, as stated by Investopedia, a website dedicated to providing investment information.
Matching contributions occur when the employer matches the employee's contributions. The employer can match up to 3 percent of the employee's salary dollar-for-dollar.
Non-elective contributions are made regardless of an employee's participation in the SIMPLE IRA plan. Employers contribute 2 percent of the qualifying employee's compensation.
SIMPLE IRA plans are designed for small businesses with less than 100 employees. Businesses may be eligible to receive a tax credit when they start a SIMPLE IRA plan.
Employees who contribute to the plan are able to reduce their income tax liability because their contributions are tax-deferred, meaning they do not pay taxes on the amount that they put into the plan. They can withdraw their contributions and earnings without penalty once they are 59 and a half years old.