SIMPLE IRA

Submitted by Denise Sowell on Mon, 2019-06-17 17:51

My question is regarding the Eligibility Period for a SIMPLE IRA. Can it be waived for a new employee? I have a client who says that it was waived numerous times in a previous SIMPLE IRA plan that he just left. He is the Executive Director of the Non-profit and I feel that someone allowed it to placate certain Executives.

Thank you for you help.

Denise



Submitted by William Tuttle on Mon, 2019-06-17 23:02

  • It is a serious SIMPLE IRA plan error to not uniformly apply participation eligibilty rules.
  • A plan can reduce/eleminate the $5,000 compensation requirement and/or reduce the 2 year requirement to a 1 year or even no time of service requirement.
  • However, whatever participation eligibilty requirements there are they MUST apply 100% to ALL employees equally.

Submitted by Denise Sowell on Tue, 2019-06-18 11:44

Thank you, I will deliver the message to the new Executive.

Submitted by Matt Mason on Tue, 2019-06-18 18:47

(for a plan with 1 or 2 years eligibility, with semi annually adjustments)  It is my understanding that under the SIMPLE IRA they act as a calendar year plan.  If eligible, you can choose to participate Jan 1.  If you are participating you can adjust your deferral July 1 on the semi annual date.  If you choose not to participate on Jan 1, you cannot choose to just start on the July 1 date?  Correct?

Submitted by William Tuttle on Wed, 2019-06-19 00:28

  • From IRS Form SIMPLE-5305, Article II Salary Reduction Agreements, 2b. “In addition to the election periods in 2a, eligible employees may make salary reduction elections or modify prior elections.”
  • Each additional election period is just that. A participant can make an initial salary reduction agreement during their yearly election period or any additional election period.
  • Note: A participant can terminate an election at any time, but may not restart until the next election period.

Submitted by Denise Sowell on Thu, 2019-06-20 14:31

Please confirm that changes to SIMPLE IRA Plan  Enrollment Eligibility can only be made for a  Janaury 1st effective date. Of course,  this change has to be communicated to the employees by November 2nd of the previous year.

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