Retirement Plans

Quick Links

Hot Topics

Need Some Deductions for 2012?

Don't overlook these!

10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2012

<< Previous

When To Set Up a SIMPLE IRA Plan

January 1 through October 1:

You can set up a SIMPLE IRA plan effective on any date from January 1st through October 1st of a year, provided you did not previously maintain a SIMPLE IRA plan.

If you did previously maintain a SIMPLE IRA plan, you can set up a SIMPLE IRA plan effective only on January 1st of a year.

New Employer:

A new employer that comes into existence after October 1st of the year can set up SIMPLE IRA plan as soon as administratively feasible.

SIMPLE Plan Effective Date:

A SIMPE-IRA plan cannot have an effective date that is before the date you actually adopt the plan (complete and sign the appropriate plan document).

Employees:

A SIMPLE IRA must be set up for an employee before the first date by which a contribution is required to be deposited into the employee's IRA account.

Notification Requirement

After you adopt a SIMPLE IRA plan, you must notify each employee of the following information before the beginning of the election period.

  1. The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan.
  2. Your choice to make either matching contributions or nonelective contributions.
  3. A summary description provided by the financial institution.
  4. Written notice that his or her balance can be transferred without cost or penalty if you use a designated financial institution.

Election Period

The election period is generally the 60-day period immediately preceding January 1st of a calendar year (November 2nd to December 31st of the preceding calendar year).

However these dates are modified if:

A SIMPLE IRA plan can provide longer periods for permitting employees to enter into salary reduction agreements or to modify prior agreements.

For example, a SIMPLE IRA plan can provide a 90-day election period instead of the 60-day period.

In addition to the 60-day period, a SIMPLE IRA plan can provide quarterly election periods during the 30 days before each calendar quarter, other than the first quarter of each year.

Next:

SIMPLE Plans: SIMPLE 401 (k) Plans

Next