SIMPLE IRA enrollment

Submitted by Kerry Schepers on Mon, 2019-12-02 14:44

what are rules for SIMPLE IRA Enrollment? Plan document says 1 year of employment. If they become eligible in June, can they then enroll one year later, in June? And if employer wants to change the plan document to read 90 days instead of 1 year, can we do this yet in 2019 effective 2020? Thank you.



Submitted by Alan - IRA critic on Mon, 2019-12-02 16:40

  • Since this is an existing plan and the deadline for delivering the annual notification requirements for 2020 ended on 11/2/19, the employer cannot change the employee eligibility requirements for 2020. 2021 requirements can be changed up to 11/2/2020 in the annual notification.
  • How does the plan document refer to 1 year of employment? If a 5304 or 5305, which section states this? The employment requirement generally refers to prior calendar years, eg having 5000 of compensation in a prior calendar year.

 

Submitted by Kerry Schepers on Tue, 2019-12-03 14:54

It’s a “Adoption Agreement” with American Funds.  Says All employees receiving at least $5,000 in compensation during any 1 prior year and who are reasonably expected to receive a least $5,000 in compensation during the current year are eligible to participate in the Plan.   Maybe i should use the IRS form…

Submitted by Alan - IRA critic on Tue, 2019-12-03 15:36

  • Those provisions are typical, but the employer can change them in the annual notification by 11/2, perhaps by reducing the 5000 amount. Are you sure that American (likely a DFI) offers only this one option?  
  • I am not aware of any relief to cover  an employee that was not “reasonably expected” to receive 5000 in the current year, and then actually does receive that much. 

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