Add your IRA to payroll

A Roth IRA is an individual retirement account that allows an employee to set aside post-tax income up to a specified amount each year. Learn more about Roth IRA contribution limits from the IRS.

Setup and payments

Employees can set up their retirement account and make payments to their provider directly outside of payroll.

Reporting

A Simplified Employee Pension Individual Retirement Arrangement (SEP-IRA) is a tax-deferred retirement savings plan which allows only the employer to contribute. It's often used by small businesses as an alternative to a 401(k), due to its relatively low operating cost. 

Learn more about contribution limits from the IRS.

SEP-IRA contributions are not reported on an employee's W-2. Your SEP-IRA provider is responsible for IRS reporting, including Form 1099-R and Form 5498.

Before you start, you'll need:

• A list of all employees enrolled in this benefit
• Their personal contributions per pay period
• Your company contribution

If you have any questions about your plan setup, review your plan document or contact your IRA administrator.

Add SEP-IRA payroll deductions to Gusto

SEP-IRA plans are not managed by Gusto, but you can add the external benefit to your Gusto account for payroll purposes. When creating the benefit, be sure to enter the contribution limits for the year so that the benefit is not over-applied on payroll.

Note: You'll be responsible for updating contribution limits each year if they change.

Benefit payments

Deductions will be left in your company bank account so you can pay the funds directly to your retirement plan administrator.

Questions about your retirement plan?

For questions about your policy and benefits, contact your SEP-IRA provider directly. 

The savings incentive match plan (Simple IRA) is a tax-deferred retirement savings plan for employees. 

Learn more about Simple IRA benefits and requirements on our blog.

The maximum contribution is $16,600 in 2025 ($16,000 in 2024). If your plan allows catch-up contributions, employees age 50 or older can make additional contributions up to $3,500 in 2024 and 2025.

When you enter a percentage for Simple IRA contributions, this is based on taxable wages.   

Before you start, you'll need:

• A list of all employees enrolled in this benefit
• Their personal contributions per pay period
• Your company contribution

  • Catch-ups may apply for elective plans with a percentage-based matching contribution. In line with IRS guidance, Gusto calculates the employer contribution based on an employee’s calendar-year compensation, not just compensation on a single payroll. This is why employer contributions may continue even after an employee stops deductions. Learn more below in the section called "Understanding the employer contribution catch-up." 

If you have any questions about your plan setup, review your plan document or contact your IRA administrator.

Add Simple IRA payroll deductions to Gusto

1. Sign in to your Gusto admin account.
2. Go to the Benefits section.
3. Under “Financial Health,” choose Simple IRA.
4. Indicate whether you currently offer a Simple IRA.
   • If you do not offer a Simple IRA yet, you’ll need to set one up through another provider before adding it to Gusto—we do not currently offer a Simple IRA.
5. Add a name for the benefit. This will appear on employee paystubs.
6. Indicate the company contribution per employee. We keep track of this for your records and year-end taxes. The IRS allows you to contribute in one of two ways:
   • 1-3% matching contribution: Match employee contributions dollar-for-dollar, up to 3% of their compensation (as defined by the IRS). You can match less than 3% (1% as the lowest), but only for 2 out of 5 years of offering a Simple IRA.
     • Catch-ups may apply for elective plans with a percentage-based matching contribution. In line with IRS guidance, Gusto calculates the employer contribution based on an employee’s calendar-year compensation, not just compensation on a single payroll. This is why employer contributions may continue even after an employee stops deductions. Learn more below in the section called "Understanding the employer contribution catch-up." 
   • 2% non-elective contribution: Contribute 2% of each eligible employee's compensation, regardless of whether or how much the employee contributes.
7. Your answer to the next part depends on whether your company's plan has automatic enrollment—check with your provider if you're unsure: 
   • If yes, indicate whether automatically enrolled employees are deducted a percentage of their pay or a set dollar amount.
   • If no, choose My plan does not have automatic enrollment. 
8. Indicate whether your plan uses the standard deduction limit or the special catch-up limit.
   • If most employees are under 50, choose Use the standard limit. If your plan policy does allow the catch-up limit for employees over 50, you can change each of those employees' limits in step 12. 
9. Click Save & continue.
10. Select each person enrolled in your company's Simple IRA. If needed, you can later customize their individual contributions or deduction limits in step 12.
11. Click Save.
12. If employees contribute different amounts to their Simple IRAs, or you need to change the annual deduction limit for employees over 50, here's how to customize individual deductions: 
    • Click View benefit. You'll be taken to the new Simple IRA benefit you just set up. 
    • Find the name of the employee whose deduction or limit you need to change and click Edit benefit.
    • Make your update.
    • Click Save.

The next time you run payroll, company and employee contributions will be listed on employee paystubs. You can return to the Benefits section of your admin account anytime to add, remove, or change employee deductions or the plan details.

How the IRA deduction is calculated for payroll

SIMPLE IRA contributions are deducted from an employee’s paycheck before taxes are calculated, reducing their taxable income.

Gusto automatically calculates contributions and deductions in line with IRS guidance and based on your payroll data.

Here’s what to keep in mind when you review IRA deductions on payroll:

• The contribution is based on year-to-date compensation (not the specific payroll's compensation).
• When contributions and deferrals are calculated, SIMPLE IRA compensation is generally based on an employee's taxable wages. 
  
  • Section 125 contributions—including FSA, HSA, and Dependent Care contributions—are deducted from wages before they are considered taxable income. Therefore, they are not included in the calculation of compensation for SIMPLE IRA purposes.
  • Learn more from the IRS about how compensation is defined.
• The employer contribution can never exceed the employee deduction.
  • Example:
    • Employee deduction: $50
    • Employer contribution: 3%
    • Employee's wages: $2,500
  • Result: The employee's deduction will be $50 and the employer contribution will also be $50.
    • Why?: The employer contribution cannot exceed the employee deduction. Even though 3% of $2,500 is $75, the employer contribution in this example is capped at $50.

Benefit payments

Deductions and contributions will be left in your company bank account so you can pay the funds directly to your retirement plan administrator.

Questions about your retirement plan?

For questions about your policy and benefits, contact your Simple IRA provider directly.