SIMPLE IRA Plans Require Notification by November 1

Tuesday, October 02, 2012

By Joe Cicchinelli, IRA Technical Expert


Follow Me on Twitter: @JoeCiccEdSlott

A “Savings Incentive Match Plan for Employees” (SIMPLE), is a retirement plan for small businesses that uses a special IRA (called a SIMPLE IRA) as the funding vehicle. November 1, 2012 is the deadline for employers who are continuing to offer a SIMPLE IRA plan for next year to send you a notification.

Your employer must notify you 61 days before the beginning of next year (i.e., by November 1) of your eligibility to make voluntary salary deferral contributions or to change the amount you’ve previously been contributing. Your employer could give you more time, for example by giving you a 90-day election period. This notice also tells you if you can choose your own financial institution for your SIMPLE IRA or whether you must use one that is chosen by your employer, which is called a designated financial institution.

The employer notice also tells you the plan’s contribution formula that will be used for next year. Your employer must choose either a matching or 2% fixed contribution formula for the year. An employer matching contribution is given to you only if you’re actually contributing to the plan, whereas a 2% fixed contribution is given to you as long as you’re eligible to contribute.

Once the employer contribution formula is made, it can’t be modified. Your employer cannot terminate the SIMPLE plan during the year, nor can they stop or change the employer contributions during the year. They are obligated to make the employer contribution that was promised.

In addition to the employer notice, the financial institution that has your SIMPLE IRA must give the employer a “summary description” that contains certain information. This information includes the name and address of the employer and the financial institution, the requirements for eligibility and participation, and other information. In most cases, the financial institution gives the summary description to your employer who, in turn, forwards it to you along with the employer notice.

Article Highlights

  • November 1, 2012 is the deadline for employers who are continuing to offer a SIMPLE IRA plan for 2013 to send a notice to eligible employees
  • Once the employer contribution formula is chosen, it can’t be changed
  • Financial institutions must also provide a summary description of the SIMPLE IRA 

 

Receive Ed Slott and Company Articles Straight to Your Inbox!
Enter your email address:

Delivered by FeedBurner

 

Post Views: 9
Posted in: ,

Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to [email protected] for approval.

For white papers/other outflow pieces:

Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:

Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:

Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at [email protected] or (516) 536-8282 with any questions.