Retirement News for Employers - Fall 2011 - We're Glad You Asked!
Can I amend or terminate my SIMPLE IRA plan in the middle of the year?
No. You can’t amend or terminate your SIMPLE IRA plan mid-year. A SIMPLE IRA plan must be operated for the entire calendar year (or the remainder of the calendar year if started after January 1). Additionally, once you have given employees the annual notice describing the plan features for the coming year, you can’t change any of those features during the year.
Example: On November 18, 2011, Acme Company decided it would like to change its SIMPLE IRA plan matching contributions from 3% to 1%. Acme’s SIMPLE IRA plan notice to employees (given on November 2, 2011) stated the match would be 3% for 2012. Acme must contribute 3% for 2012. The earliest effective date for Acme’s change in matching contributions would be January 1, 2013. Acme must notify its employees during 2012 that it will reduce the matching contribution to 1% in 2013.
If your SIMPLE IRA plan no longer fits your business needs and you’d like to terminate it, notify the SIMPLE IRA plan financial institution that you won’t be contributing the next calendar year. You must also notify your employees by November 2 that you will discontinue the SIMPLE IRA plan effective the first day of the next calendar year. You don’t need to notify the IRS that you have terminated the SIMPLE IRA plan.
Example: Acme Company decided on November 18, 2011, to terminate its SIMPLE IRA plan as soon as possible. The earliest effective date for the termination would be January 1, 2013. Acme must notify its employees during 2012 that it won’t sponsor a SIMPLE IRA plan for 2013.
- FAQs: SIMPLE IRA Plans
- Terminate a SIMPLE IRA Plan
- Notice 98-4, SIMPLE IRA Plan Guidance
- Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)
- Publication 4334, SIMPLE IRA Plans for Small Businesses