Establishing a SIMPLE IRA Plan
Starting a SIMPLE IRA plan is easy to do!
Choosing a Financial Institution
You’ll need to choose a financial institution to serve as trustee of the SIMPLE IRAs to hold each employee’s/participant’s retirement plan assets. These accounts will receive the contributions you make to the plan. Alternatively, you can decide to let employees choose the financial institution that will receive their contributions.
Three Steps to Set up a SIMPLE IRA Plan
You can use Form 5304-SIMPLE or Form 5305-SIMPLE to set up a SIMPLE IRA plan. Each form is a model Savings Incentive Match Plan for Employees (SIMPLE) plan document.
You adopt the SIMPLE IRA
plan when you have completed all appropriate boxes and blanks on the
form and you (and the designated financial institution, if any) have
signed it. Keep the original form. Do not file it with the IRS.
Annual Notice to Eligible Employees
You must notify each employee before the beginning of the election period of:
The election period is
generally the 60-day period immediately preceding January 1 of a
calendar year (November 2 to December 31). However, the dates of this
period are modified if you set up a SIMPLE IRA plan in mid-year or if
the 60-day period falls before the first day an employee becomes
eligible to participate in the SIMPLE IRA plan.
Set Up a SIMPLE IRA for Each Eligible Employee
A SIMPLE IRA must be set
up by or for each eligible employee and all contributions to the plan
must go to it.
Financial institutions authorized to hold and invest SIMPLE IRA plan contributions include banks, savings and loan associations, insurance companies, certain regulated investment companies, federally-insured credit unions and brokerage firms. SIMPLE IRA plan contributions can be put into stocks, mutual funds and other similar types of investments. The investment options available at the institution where the SIMPLE IRA is located will determine what kinds of investment choices are available to the employee as he or she makes decisions about investing his or her SIMPLE IRA accounts.
You and your employees will receive a statement from the financial institutions investing your SIMPLE IRA plan contributions both at the time you make the first SIMPLE IRA plan contributions and at least once a year after that. Each institution must provide a plain-language explanation of any fees and commissions it imposes on SIMPLE IRA assets.
Timing of Setting Up a SIMPLE IRA Plan
You can set up a SIMPLE
IRA plan effective on any date from January 1 through October 1 of a
year, provided you did not previously maintain a SIMPLE IRA plan. This
requirement does not apply if you are a new employer that comes into
existence after October 1 of the year the SIMPLE IRA plan is set up and
you set up a SIMPLE IRA plan as soon as administratively feasible after
your business comes into existence. If you previously maintained a
SIMPLE IRA plan, you can set up a SIMPLE IRA plan effective only on
January 1 of a year. A SIMPLE IRA plan cannot have an effective date
that is before the date you actually adopt the plan.
Source: http://www.IRS.gov. Page Last Reviewed or Updated: 2012-11-19
For Professional Consultation Services Contact:
1186 Route 56 East
Apollo, PA 15613-9725 USA
Phone: 800-622-2411 or Fax: 724-478-1688
E-mail - email@example.com
Information is provided for review and consideration only. Please consult legal and tax advisors for practical advice pertaining to your business and personal situations.
This page was last reviewed and/or updated on Friday, July 03, 2015 05:21 PM