Important Notice for SIMPLE IRA Plan Sponsors

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 pages 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.

Distribution Procedures

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 etrade.com/uploaddocuments  

• Mailing or faxing it to the address and fax number at the top of the form

Please note: Distributions from a Traditional 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 introduced several optional provisions for SIMPLE IRA plans, including allowing employers to offer employees the ability to elect contributions to be made to a Roth SIMPLE IRA and increased contribution limits. If you wish to implement any of these provisions, you are required to take formal action (e.g., corporate resolution, board action), operate your plan in compliance with the new provisions, document the elections in your books and records for the plan, and amend your plan when required.

The IRS has issued limited guidance in Notice 2024-2, which focused on contribution limits, mid-year termination of plans, and reporting requirements for Roth SIMPLE IRAs; however, additional guidance is needed before all provisions may be fully implemented.

Treatment of Student Loan Payments as Elective Deferrals for Purposes of Matching Contributions

Employer matching contributions may be made on behalf of employees with respect to "qualified student loan payments".

Additional Non-elective Contributions for SIMPLE Plans

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

The elective deferral and catch-up limits are automatically increased if you are an eligible employer with 25 or fewer qualifying employees (i.e., a small employer SIMPLE plan) and it is permitted by the plan. If you are an eligible employer with more than 25 but no more than 100 qualifying employees, you may elect to provide the higher deferral and catch-up limits, provided that it is permitted by the plan and you either make a 4% matching contribution or a 3% non-elective contribution (i.e., electing employer SIMPLE plan). Increased limits only apply to eligible employers if they have not maintained another retirement plan during the 3-year period before offering the SIMPLE IRA plan. An election to apply the increased limits remains in effect until revoked. If you decide to not offer the increased limits for a future year, you must take written action (i.e., corporate resolution or other instrument) to revoke the election before providing the annual notice to your employees.

If the participant has attained age 60, 61, 62, or 63, and permitted by the plan, an increased catch-up limit may apply.

Mid-year Termination of and Rollover from SIMPLE IRA

An employer may elect to terminate the SIMPLE IRA Plan during the plan year if they have established a safe harbor 401(k) plan as its replacement. The employer must take formal written action (i.e., corporate resolution or other instrument) specifying the termination date and must provide employees at least 30 days notice and a description of how the termination and rollover will work.

Roth SIMPLE IRA

A SIMPLE IRA may be designated as a Roth SIMPLE IRA and accept Roth contributions under the SIMPLE IRA plan.

Please note that employer contributions made to a Roth SIMPLE IRA must be reported by you to the IRS and the participating employee on IRS Form 1099-R. If you choose to offer contributions to Roth SIMPLE IRAs, you must notify your employees and allow them to elect whether to receive these contributions.

The Form 5304-SIMPLE has not yet been amended to reflect the Roth SIMPLE IRA provisions permitted under the SECURE 2.0 Act. Because the deadline for adopting any required plan amendments is December 31, 2027 (or such later date as may be prescribed by the IRS), you are not required to amend the SIMPLE IRA Plan Employer Adoption Agreement at this time. Instead, if you elect to allow Roth contributions, you should take formal action (e.g., corporate resolution, board action), operate the plan in accordance with the applicable legal requirements, document the election in your books and records for the plan, and amend your plan when required.

For additional information on Form 5304-SIMPLE and operating a SIMPLE IRA plan, we encourage you to speak with a tax advisor.

1 Types of valid government issued IDs include driver’s license, passport, and foreign national ID with proper translation.

 

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CRC# 5902967  09/2026