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September 14, 2011

Procedures for Establishing a SIMPLE IRA

A SIMPLE IRA Plan must be properly established in order for contributions to be made to the plan and for the plan to be in compliance with the applicable rules and regulations. Proper establishment includes establishing the plan by the deadline, completing the proper documentation, and providing employees with the proper notification.
Procedures for Establishing The SIMPLE IRA Plan
There are two key steps that must be taken when establishing the SIMPLE IRA. The first is the employer establishing the SIMPLE IRA plan and the second is the employee establishing his SIMPLE IRA under the plan.
Generally, financial institutions maintain a copy of the employer’s SIMPLE IRA Plan agreement ( 5304-SIMPLE, 5305-SIMPLE or prototype SIMPLE) with a copy of the participant’s SIMPLE IRA adoption agreement, so as to maintain proper records of which employer’s plan the participant’s is associated with.
Financial institutions usually that uses the IRS Model 5304-SIMPLE or 5305-SIMPLE Forms usually personalize these forms by adding their names and logos and may require that employers use their personalized forms or prototype forms. Exceptions usually apply in cases where an employee chooses to establish a SIMPLE IRA with a financial institution other than the one with which the employer established the SIMPLE IRA Plan. In such cases, the other financial institution will accept a copy of the SIMPLE Plan agreement that was completed by the employer, but require the participant to use their SIMPLE IRA Adoption agreement.
The financial institution with which the SIMPLE IRA is maintained will generally and likely require that the participant use their SIMPLE IRA adoption agreement.

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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