Although employees can contribute to their SIMPLE IRA plans past the age of 70 1/2, they cannot distribute their 12/31 required minimum distributions from the same or other plans directly into their SIMPLE IRA, reports the IRS. The employee must make contributions through employee salary reductions and employer matching contributions.
Employees continuing to work past the age of 70 1/2 have the right to continue to make contributions to their SIMPLE IRA through salary deferrals, and employers are obligated to match the contributions or make non-elective contributions of 2 percent of an employee's salary, as of 2015, according to the IRS. No other contribution methods are allowed, although employees are able to roll over the contributions and earnings from one SIMPLE IRA to another SIMPLE IRA. Even if an employee continues to contribute to a SIMPLE IRA, he must initiate required minimum distributions from the same SIMPLE IRA by April 1 of the year after the year he turns 70 1/2 and by December 31 of every year after.
If the employee fails to take required minimum distributions when necessary, the IRS levies a penalty tax of 50 percent of the amount that should have been distributed, states the IRS. Although a plan administrator can help calculate the amount of the distribution, the SIMPLE IRA plan owner is responsible to withdraw the correct amount.