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Retirement News for Employers - Spring 2012 - We're Glad You Asked! - Form 5305-SIMPLE

Our company adopted a SIMPLE IRA plan with a designated financial institution using Form 5305-SIMPLE. Can the participants choose a different financial institution for their SIMPLE IRA accounts?

Yes, participants can transfer their SIMPLE IRA account balances to another financial institution without costs or penalties. However, you must continue depositing future employer and employee SIMPLE IRA plan contributions to their SIMPLE IRA at the designated financial institution.

By using Form 5305-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) - for Use With a Designated Financial Institution, to establish your plan, you and the designated financial institution agreed:

  • you would deposit all your SIMPLE IRA plan contributions to SIMPLE IRAs established at the designated financial institution;
  • plan participants could transfer funds from their SIMPLE IRAs without cost or penalty to another SIMPLE IRA or, after a 2-year period of participation, to any IRA at another financial institution; and
  • you, as plan sponsor, would give each participant a written notice describing the transfer request procedures.

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Page Last Reviewed or Updated: 28-Mar-2014