Plan Administration

Trustees of SIMPLE plans and employers maintaining these plans are not required to meet the complex reporting requirements of ERISA. SIMPLE plans impose a streamlined reporting regimen on both trustees and employers — one of the key administrative advantages of a SIMPLE plan over other qualified retirement plans.

Trustees of SIMPLE IRAs (and issuers of annuities within SIMPLE IRAs) are only required to:

• Provide employers with a summary description of plan requirements and procedures (annually)
• Provide an annual account statement to each individual for whom a SIMPLE account is maintained

The trustee must provide the summary description early enough that employers can meet their own notification obligations to employees.

The annual summary description provided by the trustee to the employer must include:

• The name and address of the employer and trustee
• The requirements for participation eligibility
• The benefits provided under the plan
• The time and method of making salary reduction elections
• The procedures for, and effect of, withdrawals from the plan account
• The procedures for, and effects of, rolling over distributions from a SIMPLE account

The trustee must provide an account statement to each individual by January 31 each year, reflecting the account balance as of December 31 and account activity during the year. The trustee also files information annually with the IRS including contributions, rollovers, fair market value, and any distributions — noting whether a distribution occurred during an individual’s first two years of participation.

Employers maintaining a SIMPLE plan are not required to file annual reports with the IRS. However, employers must notify each eligible employee of:

• The employee’s right to make salary reduction contributions
• The contribution alternative elected by the employer (matching vs. nonelective) for the upcoming year
• The employee’s right (if applicable) to select the financial institution that will serve as trustee

The notice must include a copy of the summary description prepared by the trustee and must be provided immediately before the 60-day election period. If a SIMPLE IRA was established using Form 5305-SIMPLE, the employer may simply provide the first two pages of the completed form instead of a separate summary description.

Under SECURE Act 2.0, eligible small employers with 100 or fewer employees may claim a tax credit equal to 100% of the startup costs to establish a SIMPLE, SEP, or other qualified plan, up to $5,000 per year for each of the first three years of the plan’s existence.

Generally, an employer must allow an employee to select the financial institution that will hold contributions to the SIMPLE IRA. Under certain circumstances, however, an employer may require that all contributions be made to a trustee chosen by the employer.

In either event, the financial institution must permit the participant’s account to be transferred without cost or penalty* to another SIMPLE IRA (or, after two years of participation, to any other IRA selected by the participant). Each participant must receive written notice of the transfer procedures, including any time restrictions.