SIMPLE IRAs and Rehires

Submitted by Jack Thomas on Mon, 2015-06-15 22:20

The employer has made the eligibility for the SIMPLE IRA such that employees have to be with the employer for 1 year and make at least $1 in compensation. The employer had a long time (10+ years) employee quit in October 2014 but then the same employee was rehired in May 2015. Is that employee immediately eligible for the SIMPLE IRA plan or must they wait until January 1 2016 to enter the plan?

The custodian of the plan has stated that there is no IRS language that addresses rehires and that it would be up to the employer to decide what he wants to do in this particular case.

Any input is greatly appreciated.



Submitted by Alan - IRA critic on Mon, 2015-06-15 23:57

Per the following QA in Notice 98-4, it appears that the rehire must be covered immediately: 

Q. C-1: Which employees of an employer must be eligible to participate under the SIMPLE IRA Plan? A. C-1: If an employer establishes a SIMPLE IRA Plan, all employees of the employer who received at least $5,000 in compensation from the employer during any 2 preceding calendar years (whether or not consecutive) and who are reasonably expected to receive at least $5,000 in compensation during the calendar year, must be eligible to participate in the SIMPLE IRA Plan for the calendar year.

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