SIMPLE Eligibility
Hello,
A business owner set up a SIMPLE plan in May of 2021. The plan doc required 2 years of eligibility, however the business owner has been including everyone in the plan right away. Technically they didn’t follow the plan rules, but they gave access to benefits earlier rather than later.
1. Do you think an IRS/DOL auditor would have an issue with this error, seeing and employees were given more opportunity to save?
2. If you think this would be an issue, any idea how the employer would correct contributions made by employees when they weren’t eligible? The IRS SIMPLE fix it guide only provides guidance on excluding employees, not including them too early?
Thank you.
Permalink Submitted by Alan - IRA critic on Mon, 2023-03-06 20:56
Since all EEs were treated equally as if the 5305 specified minimum requirements, the employer should just document what happened each year and attach the explanation to the 5305 for that year, and be sure to correct the 5305 for 2024 as desired for that year and include it with the annual Notice by 11/2. If an IRS audit was conducted I doubt that there would be any serious repercusssions.