Add your IRA to payroll

A Roth IRA is an individual retirement account that allows anyone with taxable income below the Modified Adjusted Gross Income (MAGI) limit for that taxable year to contribute 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 Roth individual retirement account and make payments to their provider directly (outside of payroll).

Reporting

Individual contributions to a non-employer sponsored Roth IRA are paid to providers by account owners directly, and do not need to appear on the employee's W-2—this means there's no need to add this in Gusto.

A Simplified Employee Pension Individual Retirement Arrangement (SEP-IRA) is a tax-deferred retirement savings plan which allows only the employer to contribute. They're often used by small businesses as an alternative to a 401(k), due to their 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 required IRS reporting, including Form 1099-R to report distributions and Form 5498 to report contributions.

Before you start, you'll need:

• A list of all employees enrolled in this benefit

• 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

To run deductions through payroll, you will still need to 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 to make sure 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 for Employees (SIMPLE IRA) is a tax-deferred retirement savings plan for employee and employer contributions. 

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

The maximum contribution depends on the size of the employer and sometimes depends on whether the employer has elected to allow higher contributions. Catch-ups are additional employee contributions permitted for employees over age 50. 

≤25 Employees

26–100 Employees (elected)

26–100 Employees (no election)

Application

Automatic

Must elect

N/A

Employee contribution limit (2026)

$18,100

$18,100

$17,000

Catch-up age 50–59, 64+ (2026)

$3,850

$3,850

$4,000

Catch-up age 60–63 (2026)

$5,250

$5,250

$5,250

Employer match

3% (standard)

4% (increased)

3% (standard)

Employer nonelective

2% (standard)

3% (increased)

2% (standard)

When you enter a percentage for SIMPLE IRA contributions, this is generally based on taxable compensation (most pre-tax employee salary reduction elections are included with the exception of cafeteria plan pre-tax employee salary reduction elections). 

Before you start, you'll need:

• A list of all employees enrolled in this benefit

• Their personal contributions per pay period

• Your company contribution

  • True-ups may apply for plans with a 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 true-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.

   • If you do not see this, click Show more financial benefits.

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. Tell us about your company. This will help us determine if you meet the criteria for the increased employee deferral limit allowed by the Secure 2.0 Act.

7. 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.

     • If you select that your company has 26–100 employees, you can match up to 4%. The increased match is a requirement if you want to offer the increased deferral limit provided in the Secure 2.0 Act. 

     • True-ups may apply for plans with a 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 true-up." 

   • 2% non-elective contribution: Contribute 2% of each eligible employee's compensation, regardless of whether or how much the employee contributes.

     •  If you select that your company has 26–100 employees, you can select 3%. The increased contribution is a requirement if you want to offer the increased deferral limit provided in the Secure 2.0 Act.

8. Let us know if your plan allows employees aged 50 and over to contribute more to their SIMPLE IRA. This includes the super catch-up provided to employees aged 60-63 as described in the Secure 2.0 Act.

9. If you have an option (you have at least 26 employees), you'll be asked if your plan offers the increased SIMPLE IRA employee deferral limit as described in the Secure 2.0 Act. This higher amount is required for plans with 25 or fewer employees.

   • Note: If a higher employee deferral limit is selected for a larger employer, the higher match/nonelective contributions will also apply.

10. Click Save & continue.

11. Fill out employee enrollment details. 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. 

12. Click Save & continue.

13. Add employees to the benefit. Select each person enrolled in your company's SIMPLE IRA. If needed, you can later customize their individual contributions or deduction limits in step 15.

    • You must include all employees who have met the eligibility rules defined in your SIMPLE IRA plan document. The most restrictive eligibility rules require all employees that have earned at least $5,000 in compensation during any 2 years before the current calendar year and are expected to earn at least $5,000 in the current year to be eligible to participate in the plan.

14. Click Save.

15. If employees contribute different amounts to their SIMPLE IRAs, 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 employer contribution is based on year-to-date compensation (not the specific payroll's compensation).

• When employer contributions and employee deferrals are calculated, SIMPLE IRA compensation is generally based on an employee's taxable compensation. 

  • Section 125 contributions—including FSA, HSA, and Dependent Care contributions—are deducted from compensation before they are considered taxable income. They are not included in the calculation of compensation for SIMPLE IRA purposes.

  • Note that other pre-tax employee salary reduction elections are included in compensation when SIMPLE IRA contributions are calculated.

  • Review your plan document to determine what is eligible compensation for SIMPLE IRA plan purposes.  You can also learn more from the IRS about how compensation is defined.

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.