SIMPLE plans

Submitted by Wendy Mommaerts on Mon, 2020-11-02 14:16

Was wondering if you could please clarify the SIMPLE Plans…

Scenerio 1)
Employee hire date: 6/1/2020

Wages:
2020: 10K
Expected wages for 2021: 20k

Plan document states the employee must receive at least $5,000 during any 1 calendar year and $5,000 for the calendar year.

Question:
I am assuming this employee can enroll in the plan for 1/1/2021?

Scenerio 2)

Employee hire date: 2/1/2015

Wages:
2015 10k
2016 11k
2017 12k
2018 13k
2019 14k
2020 15k
Expected wages for 2021 16k

Plan document states the employee must receive at least $5,000 during any 1 calendar year and $5,000 for the calendar year.

Question:
I’m assuming this employee had the ability to enroll in the plan anytime in 2016 or would this employee would have to wait for the 60 day period between 11/1 and 12/31?

Question:
Is the 60 day period between 11/1 and 12/31 only for the employees already in the SIMPLE plan giving them the option to change their salary election for the new year? Or is it for the employees already in the SIMPLE plan giving them the option to change their salary election for the new years AND the only time newly eligible employee’s can enroll in to the plan for the upcoming year?



Submitted by Alan - IRA critic on Mon, 2020-11-02 16:12

  • Scenario 1 – correct, 1/1/2021
  • Scenario 2 – Note that the year end 60 day period begins 11/2. Also, this scenario seems to assume that the employer had established the SIMPLE prior to when the employee first became eligible. Therefore, the employee likely first became eligible when it became reasonable to assume that the employee would earn at least 5,000 in the current year. When that becomes evident, a 60 day enrollment period begins or ends (employee option) when the employee first becomes eligible, but if employee was eligible all along, they would have to wait until the enrollment period from 11/2 to 12/31 at the end of that year to enroll effective the following 1/1. For your first question, employee would have to wait until the year end enrollment period unless they first became eligible earlier in the year and qualified for a 60 day period starting or ending on that date or the day before. For second question, the year end period can be used for those already participating to change their election, for employees who have been eligible all along to beging participation in January. As indicated earlier if an employee first becomes eligible during the current year, they have a 60 day enrollment option around the date first becoming eligible. 

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