As plan sponsor of a SIMPLE IRA Plan, you are required by the Internal Revenue Service (IRS) to provide each eligible employee with the following information prior to the employee’s 60-day election period (generally beginning November 2):
- Details concerning the employee’s opportunity to make or change a salary reduction election
- The employer’s decision to make either a matching or non-elective contribution
- Summary description of the plan
- The employee’s right to select the financial institution that will serve as the Simple IRA Custodian
If you established the SIMPLE IRA Plan using Form 5304-SIMPLE, the summary description requirement may be satisfied by providing to your employees a completed copy of page 1 and 2 of Form 5304-SIMPLE that reflects the terms of your SIMPLE IRA Plan. Additionally, you may use page 3 of Form 5304-SIMPLE to assist you with satisfying the other notification requirements. Form 5304-SIMPLE is available at https://www.irs.gov/pub/irs-pdf/f5304sim.pdf.
Employees may take a distribution from their E*TRADE SIMPLE IRA after two years from the date the account was opened (the “2-Year Period”) by submitting an online IRA distribution request at etrade.com/onlinedistribution. To take a distribution before the end of the 2-Year Period, employees must submit their distribution request using a paper form. To submit a distribution request by paper form, please follow these steps.
1. Download the IRA Distribution Request form.
2. Submit the completed form to us with a valid government issued ID1 by either:
• Uploading it securely at documentupload.etrade.com
• Mailing or faxing it to the address and fax number at the top of the form
Please note: Distributions from a SIMPLE IRA are subject to ordinary income taxes and may be subject to a penalty tax.
SECURE 2.0 Act of 2022 Changes Impacting SIMPLE IRAs
The SECURE 2.0 Act of 2022 (SECURE 2.0) was signed into law on December 29, 2022, as part of the Consolidated Appropriations Act of 2023. The law created additional contribution rules that the plan may be able to allow. At the time this was published the IRS has not issued guidance and additional guidance is needed before all provisions may be implemented.
Treatment of Student Loan Payments as Elective Deferrals for Purposes of Matching Contributions
Beginning in 2024, the SECURE Act allows employer matching contributions to be made on behalf of employees with respect to "qualified student loan payments".
Additional Non-elective Contributions for SIMPLE Plans
Effective for the 2024 tax year, employers are permitted to make additional contributions to each participant in a uniform manner, provided the additional contribution does not exceed the lesser of 10% of a participant's compensation or $5,000 (as indexed).
Increased Deferral and Catch-up Contribution Limits
Effective for the 2024 tax year, the annual deferral limit is increasing to 110% of the 2024 SIMPLE IRA plan limit (as indexed) and the catch-up contribution limit at age 50 is increasing to 110% of the 2024 SIMPLE IRA plan limit (as indexed) in the case of an employer with no more than 25 employees. Employers with 26 to 100 employees are permitted to provide these higher deferral limits, provided that the employer either provides a 4% matching contribution or a 3% employer non-elective contribution.
Mid-year Termination of and Rollover from SIMPLE IRA
Effective for 2024, an employer may elect to replace a SIMPLE IRA plan with a safe harbor 401(k) plan at any time during the year, subject to certain rules.
SIMPLE Roth IRA
A SIMPLE IRA may be designated as a Roth IRA and accept Roth contributions under the SIMPLE IRA plan. Effective in 2023, however, in practice, this provision will not be available until a later date, as guidance from the IRS is required before implementation.
For additional information on Form 5304-SIMPLE and distributions, we encourage you to speak with a tax advisor.