5304 SIMPLE notice requirements?
Hi,
We have a new client who operates a business with employees and they are currently contributing to a SIMPLE IRA plan. The Client/Business owner does not know if the plan was a 5304 or 5305 (For, or Not for use with a designated financial institution) but, they want to change the financial institution to us for 2021. Ideally we would just want to restate the plan on 5304 so that the owner and the employees can have their choice of who to use for 2021. What are the notice requirements for this form to amend their SIMPLE plan for 2021 such as, how long in advance of 1/1/21 do the employees have to be provided the notice, and can other elements of the plan be changed or amended with this notice, such as changing the amount of compensation to be covered, or the number of past years to be covered as a participant?
Will using this new form “change” the SIMPLE from whatever it was in prior years to whatever we indicate on the form? Or is there some other kind of amending and restating kind of thing needed? Basically we are trying to do this without having to go through the hassle of finding the old 5304/5305.
We realize the funds and accounts won’t move just curious if this changes the nature of the plan. We realize the form isn’t filed with the IRS but want to notify the participants correctly if possible.
THANK YOU!
Permalink Submitted by Alan - IRA critic on Fri, 2020-11-20 23:05
Apparently, this client has been violating various requirements for a SIMPLE IRA plan sponsor. An annual Notice is required to be provided to each eligible employee no later than 11/2 of the year before the following plan year. The notification form is different for a 5304 SIMPLE than a 5305 SIMPLE. The employer can change certain provisions in this Notice for the following year (eg the matching contribution) and the employee must make their elections before the end of the prior year (between 11/2 and 12/31). Failure to send this annual Notice can trigger a penalty of $50 per day. There must be some way to determine what the current plan type is (5304 or 5305), but it is too late to change the provisions for 2021 now that 11/2 has passed. Perhaps the owner can check with an employee who has been there over 3 years and is detail oriented enough to have kept the last annual Notice they received. If employees are using different SIMPLE IRA custodians, then the plan is likely a 5304. Changes will have to wait until 2022.