Setting Up a SIMPLE Plan
A SIMPLE plan can be set up in either of two ways:
- Using SIMPLE IRAs (SIMPLE IRA plan).
- As part of a 401(k) plan (SIMPLE 401(k) plan)
Form 5304-SIMPLE or Form 5305-SIMPLE can be used to set up a SIMPLE IRA plan.
- Each form is a model savings incentive match plan for employee plan document.
- Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receive his/her contributions.
- Use Form 5305-SIMPLE if you require all contributions be deposited initially at a designated financial institution.
- The SIMPLE plan is adopted when you complete all appropriate boxes and blanks on the form and you (and the designated financial institution, if any) have signed it.
- Keep the original form you decide to use for your records.
- Either form will serves as proof that you set up a SIMPLE-IRA plan for employees.
- DO NOT file Form 5305-SIMPLE or Form 5305-SIMPLE with the IRS.
- By using either Form 5304-SIMPLE or Form 5305-SIMPLE, you will meet the notification requirements for the SIMPLE IRA plan.
- Page three (3) of Form 5304-SIMPLE and page three (3) of Form 5305-SIMPLE contain a Model Notification to Eligible Employees that provides the necessary information to the employees.
A SIMPLE Plan...
- Can only be maintained on a calendar year basis
- Must be set up for each eligible employee
- Cannot be designated as a
Roth IRA. However, contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth IRA.
After the SIMPLE Plan is Set Up;
What is an Eligible Employee?
What is an Excludible Employee?