SIMPLE IRA Plans - Employee Annual Notification Due November 2

Oct 26, 2011

A Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA plan allows eligible employees to defer salary and requires an employer to contribute each year. An employer with a SIMPLE IRA plan deposits employee salary deferrals and makes its required contributions to each employee's SIMPLE IRA.

Though it avoids the complex nondiscrimination testing essential to a traditional 401(k) plan, a SIMPLE IRA plan has other important administrative requirements. Perhaps most important is the employer's annual notice to participants.

Each year, an employer notifies participants of its contribution choice for the coming plan year and provides them with a 60-day salary-deferral election period. A financial organization serving as a SIMPLE IRA custodian/trustee is responsible for providing part of the content of this annual notice.

This article serves as a reminder of the SIMPLE IRA plan notice requirement and reviews the necessary content.


An employer must provide the notice to each SIMPLE IRA plan participant prior to a required 60-day election period. SIMPLE IRA plans are calendar year plans so the annual 60-day election period runs from November 2 through December 31.

When notifying an employee who enters a SIMPLE IRA plan during a plan year, an employer must provide a different 60-day election period. It must include the employee's first day of eligibility or the day before.


An employer's SIMPLE IRA plan notice must contain:

  • A reminder of a participant's right to elect a new or modify an existing salary deferral or reduction agreement within the 60-day election period.

  • An announcement of the type and amount of the employer's contribution for the coming year.

  • A statement that a participant must establish a SIMPLE IRA with any SIMPLE IRA custodian/trustee he/she chooses and provide the location to the employer, if the employer established its SIMPLE IRA plan with IRS Form 5304-SIMPLE. For a SIMPLE IRA plan established with IRS Form 5305-SIMPLE, all employees must establish SIMPLE IRAs with the custodian/trustee chosen by the employer-the designated financial institution (DFI).

  • A Summary Description provided by each participant's SIMPLE IRA custodian/trustee. This is generally a copy of the current SIMPLE IRA plan document (IRS Form 5304-SIMPLE or IRS Form 5305-SIMPLE) together with the financial organization's current Procedures for Withdrawal. For plans established with Form 5305-SIMPLE, the Summary Description also includes the DFI's policy and procedures for transfers without cost or penalty of SIMPLE IRA plan contributions during the coming year.

An employer should begin collecting this information from each SIMPLE IRA custodian/trustee early enough to ensure delivery of the complete notice before November 2. A SIMPLE IRA custodian/trustee should start preparing its Summary Description and Procedures for Withdrawal as soon as possible to be ready for employers in late September or early October.

Not providing the notice could result in an employer-paid penalty of $50 per day until the employer provides the notice.


For more information on SIMPLE IRA plan notice requirements, an employer should look to its SIMPLE IRA plan agreement (Form 5304-SIMPLE or Form 5305-SIMPLE). IRS Notice 98-4 also provides information on the annual notice requirements and much more information on the operation of a SIMPLE IRA plan. Click here to read Notice 98-4.

An employer should seek the guidance of a tax or legal professional to determine its best contribution choice for each plan year, in drafting its annual employee notice, and to ensure compliance with all SIMPLE IRA plan rules.

Call us at (620) 241-1826 if you have any questions.

To review the SIMPLE IRA checklist published by the IRS,
click here.