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Deadline for Establishing the Employee SIMPLE IRA

Last Updated September 15, 2011

 
The participant's ( employee) SIMPLE IRA must be established before the first day by which a contribution is required to be deposited to his SIMPLE IRA. In order to establish the SIMPLE IRA, the employee must complete the SIMPLE IRA Adoption agreement for the financial institution to which his SIMPLE IRA contributions will be made. The financial institution may also have additional documentation requirements, such as a ‘new account application form’ that must be completed by the employee. If the employee is unable or unwilling to complete the SIMPLE IRA adoption agreement, the employer may complete the agreement on his behalf.
 
 
Example 1:
John works for Company B and Company B adopted a SIMPLE IRA Plan on February 1, 2010. John did not elect to make salary deferral contributions to his SIMPLE IRA. Company B had elected to make a 2% nonelective contribution to eligible employees, and is required to deposit the 2% nonelective contribution by its tax filing deadline including extensions. Company B will be depositing the contributions on March 31, 2011. Since no SIMPLE IRA contributions will be deposited to John’s SIMPLE IRA before March 31 2011, his SIMPLE IRA need not be established until March 30, 2011
 
 
Example 2:
The facts are the same as in Example 1, except that Company C elected to make a 3% matching contribution. Since John will not receive a matching contribution (there is no salary deferral to match), a SIMPLE IRA should not be establish for John. Establishing a SIMPLE IRA for John may only mean paying account administrative fees for a zero balance account.
 
Note: The deadline for establishing the SIMPLE IRA Plan is different from the deadline by which an employee’s SIMPLE IRA must be established. Click here for Deadline for Establishing SIMPLE IRA Plan( Employer Deadline)
 
 

Tip provided by Denise Appleby