Increased Limit for owners of SIMPLE plans

An “increased-limit” SIMPLE is based on the employer’s size (headcount test) and—if they’re bigger—whether they made an opt-in election and bumped the employer contribution formula. The IRS COLA notice just says there are two limits ($16,500 vs. $17,600 and $3,500 vs. $3,850 catch-up for 2025), but the why is in the tax code. IRS

1)     If the employer had 25 or fewer employees last year, it’s basically automatic

The higher “adjusted dollar amount” applies when the employer had not more than 25 employees who received at least $5,000 of compensation in the preceding year. Legal Information Institute

So if your company is that size, you’re in the “increased-limit” bucket (the $17,600 / $3,850 numbers for 2025). IRS+1

2)     If the employer had more than 25 employees last year who earned $5000 or  more

For employers not in the ≤25 group, the higher limit applies only if the employer elects it “at such time and in such manner as prescribed by the Secretary.” Legal Information Institute

And if they do that election, the SIMPLE’s employer contribution requirement gets bumped:

·         Matching formula becomes 4% (instead of 3%). Legal Information Institute

·         Nonelective formula becomes 3% (instead of 2%). Legal Information Institute