Simple IRA Regulations Continued
December 24th, 2007
Salary Reduction Agreement: The employer completes part of the form. Each employee receives a copy, and completes the remaining portion of the form, and returns it to the employer. Eligible employees use this form to advise the employer of their rate of elective deferrals or to stop their elective deferrals.
SIMPLE IRA Plan Summary: The employer completes part of the form only. This form provides general information regarding SIMPLE IRA Plans to employees.
Step 2: The employer provides copies to employees at the start of each election period. For existing SIMPLE IRA Plans, the election period is the 60-day period immediately preceding January 1 of the calendar year (November 2 to December 31 of the preceding calendar year).
Example: XYZ Company establishes a SIMPLE IRA plan, effective October 1, 2004. The employer notifies employees regarding the 2004 plan year by providing copies of Appendices A, B and C to employees on or before October 1, 2004. The employer must then notify employees on or before November 2, 2004 for the 2005 plan year and by every November 2 thereafter.
Step 3: An employee (including the business owner if he or she is also an employee) who wants to participate in the plan must complete the Salary Reduction Agreement and return it to the employer. Additionally, the employee must complete a SIMPLE IRA Adoption Agreement, which is found in the SIMPLE IRA Employee IRA Agreement.
Note: Under most SIMPLE IRA document, an employee may elect to establish a SIMPLE IRA Account at another firm that will accept the account. The employer must send monthly salary deferral checks to each financial institution where his or her employees have established their SIMPLE IRA accounts.
Step 4: Each month the employer will send the Financial Institution one check for all of the employees’ salary deferrals for the month. The employer should include a Participant Account Contribution Sheet, specifying the participant allocation of the check.
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