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September 14, 2011

Deadline for Establishing the Employee SIMPLE IRA

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

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.


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