SIMPLE IRA Plan Administration — Individual Retirement Accounts

Reporting Requirements

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.

Trustee Obligations

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.

Plan Summary Contents

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

For SIMPLE IRAs established using Form 5305-SIMPLE, the trustee may satisfy its reporting obligation by providing a current copy of Form 5305-SIMPLE with instructions, the Article VI withdrawal information, and the name and address of the financial institution. Trustees of a transfer SIMPLE IRA need not provide a summary description.

Annual Statement

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.

Employer Requirements

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.

Small Employer Startup Tax Credit

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.

Updated under SECURE Act 2.0 (2023): Prior law provided only 50% of startup costs up to a $500 annual maximum. The new credit is substantially more generous, covering up to 100% of costs up to $5,000/year for three years. (IRS Form 8881 — Credit for Small Employer Pension Plan Startup Costs)

Trustees of SIMPLE IRAs

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.

* A transfer is made “without cost or penalty” if no liquidation, transaction, redemption, or termination fee — and no commission, load, surrender charge, or similar fee — is imposed. A reasonable administrative fee may be charged to SIMPLE IRA accounts from which balances are transferred.

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