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Life Insurance in Qualified Plans

I’ve heard that sponsors of qualified retirement plans can offer life insurance as a type of investment within the plan. If that is true—what are the requirements to do so?”

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. We bring Case of the Week to you to highlight the most relevant topics affecting your business.  A recent call with a financial advisor in Colorado is representative of a question we commonly receive related to life insurance in qualified plans.

Highlights of Discussion

While life insurance is prohibited within IRAs, it is true that some qualified plans permit participants to purchase life insurance with a portion of their individual accounts within their workplace retirement plans. [See Treasury Regulation §§1.401-1(b)(1)(i) and (ii).]

If life insurance is offered as an investment within a retirement plan, the following are some critical points to keep in mind.

Death benefits must be “incidental,” meaning they must be secondary to other plan benefits. For defined contribution plans, life insurance coverage is considered incidental if the amount of employer contributions and forfeitures used to purchase whole or term life insurance benefits under a plan are limited to 50 percent for whole life, and 25 percent for term policies. No percentage limit applies if the participant purchases life insurance with company contributions held in a profit sharing plan for two years or longer. [See IRS Revenue Ruling 54-51  and PLR 201043048.

For a defined benefit plan, life insurance coverage is generally considered incidental if the amount of the insurance does not exceed 100 times the participant’s projected monthly benefit.

If the plan uses deductible employer contributions to pay the insurance premiums, the participant will be taxed on the current insurance benefit. This taxable portion is referred to as the P.S. 58 cost. Insurance premiums paid by self-employed individuals are not deductible.

A participant with a life insurance policy within a retirement plan, generally, may not roll over the policy (but he or she may swap out the policy for an equivalent amount of cash, and roll over the cash).

Participants may exercise nonreportable “swap outs.” In a life insurance swap out, the participant pays the plan an amount equal to the cash value of the policy in exchange for the policy itself. This transaction allows the participant to distribute the full value of his or her plan balance (including the cash value of the policy), and complete a rollover, while allowing the participant to retain the life insurance policy outside of the plan.

Swap Out Example:

Anne has a life insurance contract in her 401(k) plan with a face value of $150,000, and a cash value of $25,000. She elects to swap out the policy and gives the administrator a check for $25,000. In return, the administrator reregisters the insurance policy in Anne’s name (rather than in the plan’s name), and distributes the contract to her. There is no taxable event and Anne may take a distribution (once she has a triggering event) and roll over the entire amount received if that is in her best interest.

Conclusion

It is possible that a qualified retirement plan may allow participants to invest in life insurance under the plan. Check the terms of the document to determine whether it is an option and follow the incidental benefit rules.

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Taxability of IRA Conversions

I believe the IRS requires a person to treat a Roth IRA conversion as consisting of a pro rata share of the individual’s pre- and after-tax retirement assets. When determining the taxable amount of a traditional-to-Roth IRA conversion, does my client include his 401(k) plan balance in the calculation?

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. We bring Case of the Week to you to highlight the most relevant topics affecting your business.  A recent call with a financial advisor in Illinois is representative of a question we commonly receive related to Roth conversions.

Highlights of Discussion

  • Your client would not include his 401(k) balance when determining the taxable amount of a traditional IRA-to-Roth IRA conversion. Please see IRS Publication 590-A for further guidance.
  • When calculating the taxability of a conversion in this case, your client would include all of his nonRoth IRAs for which he is the direct owner, including traditional IRAs, simplified employee pension (SEP) IRAs, and savings incentive match plan for employees (SIMPLE) IRAs.
  • Retirement accounts that are not considered include
    • Inherited traditional, SEP or SIMPLE IRAs (unless a spouse beneficiary has elected to treat the inherited IRA as his or her own);
    • Defined contribution plans (e.g., 401(k) plans);
    • Defined benefit pension plans;
    • 403(b) plans;
    • 457 plans;
    • Nonqualified accounts and plans; and
    • Annuities (unless they are individual retirement annuities under Section 408(b) of the Internal Revenue Code).
  • The steps for calculating the taxable amount of a traditional IRA-to-Roth IRA conversion are part of the IRS Form 8606, which your client must complete and file to report the conversion.
  • Encourage your client to discuss the conversion with his tax advisor.

Conclusion

Because a traditional IRA-to-Roth IRA conversion is (generally) a taxable and (always) a reportable transaction, investors should consult their tax attorneys or professional tax advisors concerning their particular situations.

 

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What is the formula for calculating an RMD?

What is the formula for calculating required minimum distributions (RMDs); and is it the same for IRAs as it is for qualified retirement plans?

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. We bring Case of the Week to you to highlight the most relevant topics affecting your business.  A recent call with a financial advisor in New York is representative of a question we commonly receive related to RMDs.

For retirement plan participants and traditional IRA owners [including owners of simplified employee pension (SEP) and savings incentive match plans for employees (SIMPLE) IRAs] there is a common formula for calculating RMDs that applies to both IRAs and retirement plans:

Prior year-end account balance ÷ life expectancy = RMD

However, the definition of “prior year-end account balance” is different for IRAs than it is for qualified retirement plans. Note that an RMD for an IRA may not be satisfied from a retirement plan and vice versa.

For IRAs, the prior year-end account balance is the IRA balance on December 31 of the year before the distribution year (e.g., use the December 31, 2016, IRA balance for a 2017 RMD). Adjust this IRA balance by adding to the IRA balance any

  • Outstanding rollovers taken within the last 60 days of a year and rolled over after the first of the following year;
  • Outstanding transfers taken in one year and completed in the following year; and
  • Recharacterized conversions along with the net income attributable to the December 31 balance for the year in which the conversion occurred. (See Treasury Regulation Section 1.408-8, Q&As 6-8.)

For retirement plans, the prior year-end account balance is the retirement plan balance as of the last valuation date in the year before the distribution year. Adjust this amount by

  • Adding any contributions or forfeitures allocated to the account after the valuation date, but made during the valuation year; and
  • Subtracting any distributions made in the valuation year that occurred after the valuation date.

Furthermore, do not include the value of any qualifying longevity annuity contract (QLAC) that is held under the plan if purchased on or after July 2, 2014. (See Treasury Regulation Section 1.401(a)(9)-5, Q&A 3).

The life expectancy an account owner (either an IRA owner or retirement plan participant) uses to calculate his or her RMD is based on one of two tables provided by the IRS for this purpose. These tables can be found in Treas. Reg. 1.401(a)(9)-9 or in IRS Publication 590-B, Appendix B.  Most retirement account owners will use the Uniform Lifetime Table to determine RMDs during their lifetimes.

The Uniform Lifetime Table provides a joint life expectancy figure that is equivalent to the hypothetical joint life expectancy of the retirement account owner and a second individual who is 10 years younger. As previously stated, most retirement account owners will use the Uniform Lifetime Table, even if they have no named beneficiary.

The one exception to using the Uniform Lifetime Table applies if a retirement account owner has a spouse beneficiary who is more than 10 years younger than he or she. In this situation, the retirement account owner will use the Joint and Last Survivor Table. The result of using the actual joint life expectancy of the account owner and his or her spouse beneficiary who is more than 10 years younger is a smaller RMD for the individual.

Conclusion

While the formula for calculating an RMD from either an IRA or retirement plan appears simple on the surface, attention must be paid to the specific definitions for the numerator and denominator in order to arrive at the true minimum amount that must be distributed.

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December 2017 IRA and Retirement Plan Deadlines

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans.  We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with an advisor in California is representative  of a common inquiry involving December deadlines.

Highlights of Discussion

There are several IRA and retirement-plan related deadlines that occur in December as summarized next.

December 1, 2017 Deadline for calendar-year plans to provide plan participants with safe harbor, qualified default investment alternative (QDIA) and automatic enrollment notices.
December 15, 2017 ERISA extended deadline for distributing the Summary Annual Report to plan participants (for plans that filed Form 5500 with an extension)
December 29, 2017* Deadline for IRA owners and retirement plan participants to satisfying their second and subsequent years’ required minimum distributions for 2017
Deadline for making qualified nonelective contributions or qualified matching contributions to correct failed actual deferral percentage (ADP) or actual contribution percentage (ACP) tests in the previous plan year for plans using the current-year testing method
Deadline for removing an ADP or ACP excess contribution for the prior plan year with a 10% excess tax in order to avoid an IRS correction program
Deadline to complete a 2017 Roth IRA conversion or designated Roth in-plan conversion
Deadline to amend an existing 401(k) plan to a safe harbor design for 2018
Deadline to amend a 401(k) safe harbor plan to remove safe harbor status for 2018
Deadline to amend plan for discretionary changes implemented during the 2017 plan year

*Generally, December 31st.  However, December 31, 2017, falls on a Sunday.

Conclusion

December is a busy month for IRA and retirement-plan related deadlines. Have you marked your calendar?

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Allocating Revenue Sharing Payments

How should revenue sharing payments in a 401(k) plan be properly allocated to participant accounts?

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor in Colorado is representative of a question we commonly receive related to 401(k) plans and revenue sharing.

Highlights of Discussion

Generally, revenue sharing is compensation from plan investments (typically, mutual funds) that a plan uses to offset plan expenses. For example, if a plan contracts to pay an annual fee of $20,000 to one or more service providers and receives revenue sharing (or credits) of $2,000 the amount paid by the plan is only $18,000. The next question is how revenue sharing dollars are equitably allocated among plan participants. Specifically, which participants receive a share of the revenue sharing offset and how much is received?

Plan fiduciaries must follow a documented, prudent process in determining how to handle revenue sharing payments if they exist. If the plan document specifies how revenue sharing is to be used, the fiduciaries have a duty to follow the terms of the plan, unless it would clearly be imprudent to do so.

If the document is silent on revenue sharing, plan fiduciaries could decide to use the payments to pay plan expenses and/or allocate the revenue sharing to the accounts of plan participants.

The three ways to allocate revenue sharing payments to plan participants are 1) pro-rata; 2) per capita or 3) equalization. A pro rata allocation would be a percentage of the payment per participant in proportion to their account balances. A per capita allocation would assign the same dollar amount to each participant account. Under revenue equalization, a fund’s revenue sharing would be allocated to those participants investing in the respective fund.  For example, participants who invested in a fund that paid more in revenue sharing than the record keeper charged in administrative fees would receive a credit to their plan accounts, while participants invested in funds with no revenue sharing would receive a debit for their share of the recordkeeping fee.

There is no specific guidance from the DOL on the preferred process for allocating revenue sharing—only that the process itself must be a prudent one. However, the industry has turned to Field Assistance Bulletin (FAB) 2003-03 (regarding the allocation of plan expenses) and FAB 2006-01 (regarding the allocation of mutual fund settlement proceeds) as stand in guidance based on similar concepts. The process for determining how revenue sharing is allocated must

  1. Be deliberative and documented;
  2. Weigh the competing interests of various classes of participants and the effects of various allocation methods on those interests;
  3. Be carried out solely in the interest of participants;
  4. Bare a reasonable relationship to the services being provided to the participants;
  5. Avoid conflicts of interest; and
  6. Include a rational basis for the selected method.

 

Conclusion

While there is no preferred method for allocating revenue sharing payments, plan fiduciaries must follow a documented, prudent process in determining how to handle such payments if they exist, taking into account several key considerations enumerated above.

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Fiduciary Advisers

What is a 408(g) fiduciary adviser?

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans.  We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with an advisor in Washington is representative of a common inquiry involving investment advice fiduciaries.

Highlights of discussion

  • “Fiduciary Advisers” may provide investment advice to qualified plan participants through an “eligible investment advice arrangement” that is based on a level-fee arrangement for the fiduciary adviser, a certified computer model or both [ERISA §408(g)].
  • A fiduciary adviser may also work with IRA owners as well.
  • Plan sponsors who engage a fiduciary adviser for their participants will not be responsible for the specific investment advice given, provided the adopting plan sponsors follow certain monitoring and disclosure rules. Plan sponsors are still responsible for the prudent selection and monitoring of the available investments under the plan and the fiduciary adviser.
  • The fiduciary adviser role is part of a statutory prohibited transaction exemption for the provision of investment advice that has been around since 2007, having been created by the Pension Protection Act of 2006 (PPA-06).  It has received very little attention over the years until now given the new emphasis on defining investment advice fiduciaries.
  • A fiduciary adviser could be a registered investment adviser, a broker-dealer, a trust department of a bank, or an insurance company.
  • To satisfy the exemption, a fiduciary adviser must provide written notification to plan fiduciaries that he/she intends to use an eligible investment advice arrangement that will be audited by an independent auditor on an annual basis. The fiduciary adviser must also give detailed written notices to plan participants regarding the advice arrangement before any advice is given.
  • Every year the eligible investment advice arrangement must be audited by a qualified independent auditor to verify that it meets the requirements. The auditor is required to issue a written report to the plan fiduciary that authorized the arrangement. If the report reveals noncompliance with the regulations, the fiduciary adviser must send a copy of the report to the Department of Labor (DOL). In both cases the report must identify the 1) fiduciary adviser, 2) type of arrangement, 3) eligible investment advice expert and date of the computer model certification (if applicable), and 4) findings of the auditor.

Conclusion

Under PPA-06, plan sponsors can authorize fiduciary advisers to offer investment advice to their plan participants and beneficiaries as part of an eligible investment advice arrangement.  Plan sponsors will not be held liable for the advice given by fiduciary advisers, provided all the requirements of the prohibited transaction exemption are met.

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SIMPLE IRA Plan Annual Notices

What are the annual notice requirements for a SIMPLE IRA plan?

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans.  We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with an advisor in New Hampshire is representative  of a common inquiry involving SIMPLE IRA plans.

Highlights of Discussion

By November 1 of each year, an employer that sponsors a SIMPLE IRA plan must provide eligible employees with two important notices:

  1. the Summary Description; and
  2. the Annual Deferral Notice (IRS Notice 98-4).

The Summary Description must include the following information:

  1. The name and address of the employer and the trustee or custodian;
  2. The requirements for eligibility for participation;
  3. The benefits provided with respect to the arrangement;
  4. The time and method of making employee elections with respect to the arrangement; and
  5. The procedures for, and effects of, withdrawals (including rollovers) from the arrangement.

If a plan sponsor established the SIMPLE IRA plan using either IRS Form 5305-SIMPLE or 5304-SIMPLE , he or she can fulfill the Summary Description requirement by providing eligible employees completed copies of pages one and two of those forms. If a plan sponsor used a prototype SIMPLE IRA plan document, then the information is obtained from the forms vendor.

The Annual Deferral Notice must include the following information:

  1. The employee’s opportunity to make or change a salary deferral choice under the SIMPLE IRA plan;
  2. The employee’s ability to select a financial institution that will serve as trustee of the employee’s SIMPLE IRA, if applicable;
  3. The plan sponsor’s decision to make either matching contributions or nonelective contributions and the amount; and
  4. Written notice that an employee can transfer his or her balance without cost or penalty if he or she is using a designated financial institution.

IRS Forms 5305-SIMPLE and 5304-SIMPLE have model Annual Deferral Notices that a plan sponsor can use to satisfy this requirement.

If the employer fails to provide one or more of the required notices he or she is liable for a penalty of $50 per day until the notices are provided.

Notification failures of this sort may be eligible for correction under the IRS’ Employee Plans Compliance Resolution System (EPCRS).

Conclusion

Sponsors of SIMPLE IRA plans must ensure compliance with the annual notification requirements for eligible employees or, potentially, face IRS penalties.

 

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October–Think “Recharacterization Deadline”

Is it too late to recharacterize a Roth conversion for 2016?

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans.  We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with an advisor in New Jersey is representative of a common inquiry involving recharacterizations.

Highlights of discussions

A 2016 conversion to a Roth IRA, generally, can be undone (“recharacterized”) as late as October 16, 2017 [IRC Sec. 408A(d)(6)].  However, if your client completed a conversion of 401(k) assets to a designated Roth account within the 401(k) plan (rather than to an external Roth IRA), he or she would not be able to recharacterize the in-plan conversion, regardless of when the conversion occurred (IRS Notice 2010-84, Q&A 6.)

The IRS will allow taxpayers to recharacterize an unwanted Roth IRA conversion for any reason without tax or penalty as long as it is done by the deadline, which is generally October 15th of the year following the year of conversion. (If the time for completing the rechacterization falls on a Saturday, Sunday or legal holiday, the deadline becomes the next businesses day. October 15, 2017, is a Sunday, so the deadline becomes the 16th IRC Sec. 7503.)

The recharacterization timeframe is connected to when your client filed his or her tax return. For a conversion to a Roth IRA completed in 2016, if your client filed his or her 2016 tax return on time (i.e., by April 17, 2017) he or she could recharacterize the unwanted conversion without tax or penalty at any time up to October 16, 2017. Of course, he or she would have to properly amend the 2016 tax return to reflect the recharacterization.

For a conversion completed in 2017, if your client files his or her 2017 tax return on time (i.e., by April 16, 2018) the individual would have until October 15, 2018, to recharacterize the unwanted conversion without tax or penalty.

To accomplish a recharacterization, your client would need to transfer the converted amount, along with any gains or losses, back to a traditional IRA within the prescribed IRS timeframe. Even in the case of a qualified plan-to-Roth IRA conversion, the rechacterization must go to a traditional IRA; it cannot go back to the original qualified plan (Treasury Regulation 1.408A-4, Q&A 3 and IRS Notice 2008-30, Q&A 5).

Following a recharacterization, your client has the option to “reconvert” a similar amount to a Roth IRA after satisfying the required waiting period for a “reconversion.” The required waiting period ends on the date that is the later of

  • 30 days after the recharacterization or
  • January 1 of the year following the conversion

EXAMPLE:

Thom converted a portion of his 401(k) plan assets in 2016 to a Roth IRA. He filed his 2016 tax return timely on April 17, 2017. Thom elects to recharacterize his 2016 Roth IRA conversion to a traditional IRA by October 16, 2017, and amends his 2016 tax return. The soonest Thom could reconvert a similar amount would be November 15, 2017.

As a rule of thumb, if a client converts and recharacterizes in the same year, he or she must wait until the following year to reconvert.

Conclusion

The IRS’ Roth IRA conversion/recharacterization/reconversion rules give taxpayers a great deal of flexibility if the proper process steps are completed within the set deadlines. Clients who are contemplating any of the three actions should carefully discuss them with their tax advisors.

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Waiver of the 60-Day Rollover Time Limit

“My client has heard there is a way to obtain a waiver of the 60-day rollover time limit. Can you provide the requirements?”

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans.  We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with an advisor in Maryland is representative of a common inquiry involving rollovers.

Highlights of discussion

Yes, in fact, there are three ways a recipient of an eligible rollover distribution from an IRA or qualified retirement plan may obtain a waiver of the requirement to roll over the distribution within 60 days in order to avoid tax consequences. Your client may obtain a waiver by: 1) qualifying for an automatic waiver; 2) requesting and receiving a private letter ruling granting a waiver; or 3) self-certifying that he or she meets the requirements of a waiver, and the IRS determines during an audit of your client’s income tax return that he or she does qualify for a waiver.

Internal Revenue Code Sections (IRC §§) 402(c)(3) and 408(d)(3) provide that any amount distributed from a qualified plan or IRA will be excluded from income if it is transferred to an eligible retirement plan no later than the 60th day following the day of receipt. A similar rule applies to IRC §403(a) annuity plans, IRC §403(b) tax sheltered annuities, and IRC §457(b) eligible governmental plans [please see §§ 403(a)(4)(B), 403(b)(8)(B), and 457(e)(16)(B)].

The automatic waiver comes into play when the failure to complete the rollover timely results from an error made by the receiving financial organization. In order to qualify, all of the following must be satisfied:

1. The financial organization received the funds before the end of the 60-day rollover period;

2.  The individual followed all of the procedures set by the financial organization for depositing the funds into an IRA or other eligible retirement plan within the 60-day rollover period (including giving instructions to deposit the funds into a plan or IRA);

3.The funds were not deposited into a plan or IRA within the 60-day rollover period solely because of an error on the part of the financial organization;

4. The funds are deposited into a plan or IRA within one year from the beginning of the 60-day rollover period; and

5. It would have been a valid rollover if the financial organization had deposited the funds as instructed.

Your client could apply for a 60-day rollover waiver by requesting a private letter ruling (PLR) from the IRS according to the procedures outlined in Revenue Procedure 2003-16 and Revenue Procedure 2017-4. Note that an IRS user fee of $10,000 applies to the request. The IRS will issue a PLR waiving the 60-day rollover requirement in cases where the failure to waive such requirement would be against equity or good conscience, including casualty, disaster or other events beyond the reasonable control of the taxpayer.

Finally, your client may be able to “self certify” that he or she qualifies for the waiver if all of the following are true:

  • Your client presents a letter (a model is included in Revenue Procedure 2016-47) to the receiving financial organization that certifies the late rollover is eligible for the waiver;
  • The rollover contribution is, otherwise, a valid rollover (except the 60-day deposit requirement);
  • Your client can demonstrate that one or more of the 11 approved reasons listed in Revenue Procedure 2016-47 prevented him or her from completing a rollover before the expiration of the 60-day period (e.g., the distribution was deposited into an account that your client mistakenly thought was a retirement plan or IRA);
  • The distribution came from your client’s IRA or retirement plan;
  • The IRS has not previously denied a request for a waiver (see previous bullet);
  • The rollover contribution is made to an eligible plan or IRA as soon as possible (usually within 30 days) after the reason for the delay no longer prevents the individual from making the contribution; and
  • The representations the individual makes in the certification letter are true.

Conclusion

The IRS has provided three potential ways to obtain a waiver of the 60-day rollover time limit. Distribution recipients should carefully consider which may be most appropriate for their situations.

 

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Setting Up a SIMPLE IRA Plan

“My client and I want to know if there is a deadline for establishing a SIMPLE IRA plan for 2017?”

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans.  We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with an advisor in New Mexico is representative of a common inquiry involving savings incentive match plans for employees (SIMPLE) IRA plans.

Highlights of discussion

  • Yes, there is. The general deadline for establishing a SIMPLE IRA plan for a given year is October 1. For example, the deadline for an eligible business owner to set up a SIMPLE IRA plan for 2017 is October 1, 2017.
  • There are two exceptions to the general rule. First, if the business comes into existence after October 1 of the year the SIMPLE IRA plan is desired, then the new business owner may still set up a SIMPLE IRA plan for the year, provided he or she does so as soon as administratively feasible after the start of the new business. Second, if a business has previously maintained a SIMPLE IRA plan, then it may only set up a new SIMPLE IRA plan effective on January 1 of the following year (e.g., set up the plan in 2017 with an effective date of January 1, 2018).
  • Businesses that are eligible to establish SIMPLE IRA plans are those that
  1. Do not maintain any other qualified retirement plans; and
  2. Have 100 or fewer employees who received at least $5,000 in compensation from the employer for the preceding year [IRC §408(p)(2)(c)(i) IRC §408(p)(2)(c)(i) and IRS Notice 98-4, Q&A B4 ].
  • The basic steps for establishing a SIMPLE IRA plan are
  1. Execute a written plan document (either a government Form 5304-SIMPLE or Form 5305-SIMPLE, or a prototype plan document from a mutual fund company, insurance company, bank or other qualified institution);
  2. Provide notice to employees; and
  3. Ensure each participant sets up a SIMPLE IRA to receive contributions.
  • Employees who are eligible to participate in a SIMPLE IRA plan are those who received at least $5,000 in compensation from the employer during any two preceding years, and are reasonably expected to receive at least $5,000 in compensation during the current year.Business owners who are interested in establishing SIMPLE IRA plans must be aware of the deadline to do so, and the additional steps involved to ensure a successful set up.

Conclusion

Business owners who are interested in establishing SIMPLE IRA plans must be aware of the deadline to do so, and the additional steps involved to ensure a successful and compliant set up.

© Copyright 2017 Retirement Learning Center, all rights reserved