Simple IRS Retirement plan requirements are stipulated by the IRS (Internal Revenue Service). The plan is put into place to help small business employers have a simple way to make contributions for both their retirements and their employees cites J.K. Lasser. It is a heavily regulated area that involves punitive damages for noncompliance with its rules and regulations.
Eligibility Requirements
In order to participate in any Simple IRA retirement plan, you need to meet a variety of eligibility rules and regulations put into place by the IRS. You must be at least 21 years of age and an employee of the company offering the retirement plan. For the year 2009, you need to have received at least $500 in compensation throughout the year. That amount, according to the IRS, is subject to whatever current cost-of-living adjustments are in place. You also must have worked for at least three out of five preceding years with your employer.
Information Requirements
The IRS requires that if you are considered a qualified employee, your employer needs to make available "certain information about the Simple retirement plan" for your review. Your employer must have a copy of the IRS Form 5304-Simple available for you to see. That is one the forms your employer filed with the IRS in order to set up the retirement plan account. As found in IRS Publication 560 (Retirement Plans for Small Businesses), your employer must also make available information about your plan's contributions. This information includes the financial institution where contributions will be deposited for the employee. Information must be "provided each year prior to the employee's election period" cites the IRS. The election period is usually 60 days "prior to January 1 of the calendar year".
IRS-Approved Requirement
SIMPLE IRA plans are required to receive prior authorization by the IRS before they become legal. The proper IRS form must be filed by your employer and receive approval before any plan can be initiated or anyone can participate in it. The plan must be established with a qualified financial institutions under IRS guidelines. These institutions include insurance companies, banks or other "qualified financial institutions" cites the IRS. These institutions are where by SIMPLE IRA plan funds will be maintained.
Ownership Requirements
The SIMPLE retirement plan is required to be under the control of the individual, eligible employee. The plan is also owned by the employee, not the employer cites the IRS Publication 560.
Deadline Requirements
The SIMPLE IRA retirement plan must meet certain deadline requirements as set forth by the IRS. If your employer has not maintained any previous SIMPLE IRA plans, the IRS states that it is allowed to set up a plan any time between January 1 and October 1 of the year. On the other hand, if your employer has maintained a previous SIMPLE plan, they are limited to setting up the plan effective only on January 1 cites the IRS.
Contribution Requirements
According to the IRS, employees can choose to make contributions into their plan via payroll reductions. The employer either matches these amounts or chooses what is known as a "nonelective contribution". All contributions are required to be made directly into the SIMPLE IRA set up for the employee.
References
- J.K. Lasser's Your Income Tax 2009; Barbara Weltman; 2008
- IRS
Member Comments