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SIMPLE IRA Plan Fix-it Guide

Mistake

Find the Mistake

Fix the Mistake

Avoid the Mistake


1) You haven't updated your SIMPLE IRA plan document for current law changes.
(More) (Video)

Determine if your plan document is the latest IRS-approved plan from your financial institution or a current model plan.

Adopt the latest version of your financial institution’s IRS-approved SIMPLE IRA plan or a current IRS Form 5304-SIMPLE or 5305-SIMPLE.

Make sure you adopt the most current SIMPLE IRA plan document.

2) You have more than 100 employees who earned $5,000 or more in compensation for the prior year.
(More) (Video)

Review prior year’s compensation data to determine if you had more than 100 employees who earned $5,000 or more in compensation.

Stop employer and employee contributions to the SIMPLE IRAs.

Prior to establishing a SIMPLE IRA plan, ensure that you meet the requirements.

3) Your business sponsors another qualified retirement plan.
(More)

Determine if any employee received an allocation of contributions or accrued a benefit from your other qualified plan.

Stop employer and employee contributions to the SIMPLE IRAs.

Do not maintain another qualified retirement plan while sponsoring a SIMPLE IRA plan.

4) You excluded an eligible employee from participating.
(More) (Video)

Review plan document sections on eligibility and participation. Check whether you enrolled employees at the proper time.

Make corrective contributions to place affected employees in the position they would have been in if no mistake was made.

Review the participation status of all employees at least annually.

5) You used the wrong compensation definition to calculate deferrals and contributions to participants' SIMPLE IRAs.

(More) (Video)

Review the plan document to determine if you're using the proper compensation for deferrals and contributions.

Make corrective contributions to the plan to make up for the employees’ missed deferrals and contributions.

Review the plan’s definition of compensation to ensure that you’re using the correct amount to calculate deferrals and contributions.

6) You made incorrect or untimely employer contributions or employee elective deferrals for eligible employees.
(More) (Video)


Compare the amounts you contributed for each employee with the contribution percentage provided in the annual notice multiplied by each employee’s compensation.

Compare the dates you withheld the elective deferrals to the dates you contributed the deferrals to employees’ SIMPLE IRAs. Review employee data, payroll remittances and other records to see if you deposited employer contributions timely.


Contribute make-up amounts, adjusted for earnings through the date of correction.
 

Make corrective contributions equal to the missed earnings for the period the deposits were late.


Establish procedures to ensure that employees’ elective deferral contributions are made per the employees’ election and employer contributions are equal to the amount provided for in the annual notice and are timely deposited.

7) Employer contributions weren’t given to terminated eligible employees.
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Review employee payroll data to determine if eligible employees terminated during the year and if they were eligible to receive a contribution.

Make corrective contributions to place affected employees in the position they would have been in if no mistake was made.

Establish administrative procedures to ensure that you make an employer contribution for all eligible employees whether or not they terminated employment during the year.

8) SIMPLE IRA plan notification requirements weren't followed.
(More) (Video)

Determine if you timely provided the required SIMPLE IRA plan notifications to eligible employees.

Evaluate the impact of the failure to provide the required notices and make a reasonable correction.

Establish procedures to ensure that you timely give required notices to employees.

SIMPLE IRA Plan Overview
EPCRS Overview
SIMPLE IRA Plan Fix-It Guide (pdf)
SIMPLE IRA Plan Checklist (pdf)
IRA-Based Plans Additional Resources

IRS.gov / Retirement Plans / Correcting Plan Errors / Fix-It Guides / SIMPLE IRA Plan Fix-It Guide
 

Page Last Reviewed or Updated: 22-May-2014