Federal Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)-for Use With a Designated Financial Institution

Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)-for Use With a Designated Financial Institution
Form 5305-SIMPLE (Rev. March 2012)
Form

5305-SIMPLE

(Rev. March 2012)
Department of the Treasury
Internal Revenue Service

Savings Incentive Match Plan for
Employees of Small Employers (SIMPLE)—
for Use With a Designated Financial Institution

OMB No. 1545-1502

Do not file
with the Internal
Revenue Service

establishes the following SIMPLE
Name of Employer

IRA plan under section 408(p) of the Internal Revenue Code and pursuant to the instructions contained in this form.

Article I—Employee Eligibility Requirements (complete applicable box(es) and blanks—see instructions)
1

General Eligibility Requirements. The Employer agrees to permit salary reduction contributions to be made in each calendar year to the
SIMPLE individual retirement account or annuity established at the designated financial institution (SIMPLE IRA) for each employee who meets
the following requirements (select either 1a or 1b):
a
b

Full Eligibility. All employees are eligible.
Limited Eligibility. Eligibility is limited to employees who are described in both (i) and (ii) below:
(i) Current compensation. Employees who are reasonably expected to receive at least $
exceed $5,000) for calendar year.

in compensation (not to

in compensation (not to exceed $5,000) during any
(ii) Prior compensation. Employees who have received at least $
calendar year(s) (insert 0, 1, or 2) preceding the calendar year.
Excludable Employees
The Employer elects to exclude employees covered under a collective bargaining agreement for which retirement benefits were the subject
of good faith bargaining. Note: This box is deemed checked if the Employer maintains a qualified plan covering only such employees.

2

Article II—Salary Reduction Agreements (complete the box and blank, if applicable—see instructions)
1
2

a

b

Salary Reduction Election. An eligible employee may make an election to have his or her compensation for each pay period reduced. The total
amount of the reduction in the employee’s compensation for a calendar year cannot exceed the applicable amount for that year. See instructions.
Timing of Salary Reduction Elections
For a calendar year, an eligible employee may make or modify a salary reduction election during the 60-day period immediately preceding
January 1 of that year. However, for the year in which the employee becomes eligible to make salary reduction contributions, the period
during which the employee may make or modify the election is a 60-day period that includes either the date the employee becomes eligible
or the day before.
In addition to the election periods in 2a, eligible employees may make salary reduction elections or modify prior elections
. If the Employer chooses
this option, insert a period or periods (e.g., semi-annually, quarterly, monthly, or daily) that will apply uniformly to all eligible employees.

c

No salary reduction election may apply to compensation that an employee received, or had a right to immediately receive, before
execution of the salary reduction election.

d

An employee may terminate a salary reduction election at any time during the calendar year.
If this box is checked, an employee who
terminates a salary reduction election not in accordance with 2b may not resume salary reduction contributions during the calendar year.

Article III—Contributions (complete the blank, if applicable—see instructions)
1
2a

Salary Reduction Contributions. The amount by which the employee agrees to reduce his or her compensation will be contributed by the
Employer to the employee’s SIMPLE IRA.
Matching Contributions
(i) For each calendar year, the Employer will contribute a matching contribution to each eligible employee’s SIMPLE IRA equal to the
employee’s salary reduction contributions up to a limit of 3% of the employee’s compensation for the calendar year.
(ii) The Employer may reduce the 3% limit for the calendar year in (i) only if:
(1) The limit is not reduced below 1%; (2) The limit is not reduced for more than 2 calendar years during the 5-year period ending with
the calendar year the reduction is effective; and (3) Each employee is notified of the reduced limit within a reasonable period of
time before the employees’ 60-day election period for the calendar year (described in Article II, item 2a).

b

3
a
b

Nonelective Contributions
(i) For any calendar year, instead of making matching contributions, the Employer may make nonelective contributions equal to 2% of
compensation for the calendar year to the SIMPLE IRA of each eligible employee who has at least $
(not more than
$5,000) in compensation for the calendar year. No more than $250,000* in compensation can be taken into account in determining the
nonelective contribution for each eligible employee.
(ii) For any calendar year, the Employer may make 2% nonelective contributions instead of matching contributions only if:
(1) Each eligible employee is notified that a 2% nonelective contribution will be made instead of a matching contribution; and
(2) This notification is provided within a reasonable period of time before the employees’ 60-day election period for the calendar year
(described in Article II, item 2a).
Time and Manner of Contributions
The Employer will make the salary reduction contributions (described in 1 above) to the designated financial institution for the IRAs established under
this SIMPLE IRA plan no later than 30 days after the end of the month in which the money is withheld from the employee’s pay. See instructions.
The Employer will make the matching or nonelective contributions (described in 2a and 2b above) to the designated financial institution for
the IRAs established under this SIMPLE IRA plan no later than the due date for filing the Employer’s tax return, including extensions, for
the taxable year that includes the last day of the calendar year for which the contributions are made.

* This is the amount for 2012. For later years, the limit may be increased for cost-of-living adjustments. The IRS announces the increase, if any, in a news release, in
the Internal Revenue Bulletin, and on the IRS’s internet website at IRS.gov.

For Paperwork Reduction Act Notice, see instructions.

Cat. No. 23063F

Form 5305-SIMPLE (Rev. 3-2012)

Form 5305-SIMPLE (Rev. 3-2012)

Page

2

Article IV—Other Requirements and Provisions
1

Contributions in General. The Employer will make no contributions to the SIMPLE IRAs other than salary reduction contributions
(described in Article III, item 1) and matching or nonelective contributions (described in Article III, items 2a and 2b).

2

Vesting Requirements. All contributions made under this SIMPLE IRA plan are fully vested and nonforfeitable.

3

No Withdrawal Restrictions. The Employer may not require the employee to retain any portion of the contributions in his or her SIMPLE
IRA or otherwise impose any withdrawal restrictions.

4

No Cost Or Penalty For Transfers. The Employer will not impose any cost or penalty on a participant for the transfer of the participant’s
SIMPLE IRA balance to another IRA.

5

Amendments To This SIMPLE IRA Plan. This SIMPLE IRA plan may not be amended except to modify the entries inserted in the blanks
or boxes provided in Articles I, II, III, VI, and VII.

6

Effects Of Withdrawals and Rollovers
a

An amount withdrawn from the SIMPLE IRA is generally includible in gross income. However, a SIMPLE IRA balance may be rolled over or
transferred on a tax-free basis to another IRA designed solely to hold funds under a SIMPLE IRA plan. In addition, an individual may roll
over or transfer his or her SIMPLE IRA balance to any IRA or eligible retirement plan after a 2-year period has expired since the individual
first participated in any SIMPLE IRA plan of the Employer. Any rollover or transfer must comply with the requirements of section 408.

b

If an individual withdraws an amount from a SIMPLE IRA during the 2-year period beginning when the individual first participated in any
SIMPLE IRA plan of the Employer and the amount is subject to the additional tax on early distributions under section 72(t), this additional tax
is increased from 10% to 25%.

Article V—Definitions
Compensation

1
a

General Definition of Compensation. Compensation means the sum of wages, tips, and other compensation from the Employer subject
to federal income tax withholding (as described in section 6051(a)(3)), the amounts paid for domestic service in a private home, local
college club, or local chapter of a college fraternity or sorority, and the employee’s salary reduction contributions made under this plan,
and, if applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity contract and compensation
deferred under a section 457 plan required to be reported by the Employer on Form W-2 (as described in section 6051(a)(8)).

b

Compensation for Self-Employed Individuals. For self-employed individuals, compensation means the net earnings from self-employment
determined under section 1402(a), without regard to section 1402(c)(6), prior to subtracting any contributions made pursuant to this plan on
behalf of the individual.

2

Employee. Employee means a common-law employee of the Employer. The term employee also includes a self-employed individual and a
leased employee described in section 414(n) but does not include a nonresident alien who received no earned income from the Employer that
constitutes income from sources within the United States.

3

Eligible Employee. An eligible employee means an employee who satisfies the conditions in Article I, item 1 and is not excluded under
Article I, item 2.

4

Designated Financial Institution. A designated financial institution is a trustee, custodian, or insurance company (that issues annuity
contracts) for the SIMPLE IRA plan that receives all contributions made pursuant to the SIMPLE IRA plan and deposits those contributions to
the SIMPLE IRA of each eligible employee.

Article VI—Procedures for Withdrawals and Transfers (The designated financial institution will provide the instructions
(to be attached or inserted in the space below) on the procedures for withdrawals of contributions by employees.)
Article VII—Effective Date
. See instructions.

This SIMPLE IRA plan is effective

*

*

*

*

*

Name of Employer

By:

Address of Employer

Name and title

Signature

Date

The undersigned agrees to serve as designated financial institution, receiving all contributions made pursuant to this SIMPLE IRA plan and
depositing those contributions to the SIMPLE IRA of each eligible employee as soon as practicable. Upon the request of any participant, the
undersigned also agrees to transfer the participant’s balance in a SIMPLE IRA established under this SIMPLE IRA plan to another IRA without
cost or penalty to the participant.

Name of designated financial institution

By:

Address

Name and title

Signature

Date

Form 5305-SIMPLE (Rev. 3-2012)

Form 5305-SIMPLE (Rev. 3-2012)

Page

3

Model Notification to Eligible Employees
I. Opportunity to Participate in the SIMPLE IRA Plan
You are eligible to make salary reduction contributions to the
SIMPLE
IRA plan. This notice and the attached summary description provide you with information that you should consider before you
decide whether to start, continue, or change your salary reduction agreement.

II. Employer Contribution Election
For the
(1)
(2)
(3)

calendar year, the Employer elects to contribute to your SIMPLE IRA (employer must select either (1), (2), or (3)):
A matching contribution equal to your salary reduction contributions up to a limit of 3% of your compensation for the
year;
% (employer must insert a
A matching contribution equal to your salary reduction contributions up to a limit of
number from 1 to 3 and is subject to certain restrictions) of your compensation for the year; or
A nonelective contribution equal to 2% of your compensation for the year (limited to compensation of $250,000*) if you
are an employee who makes at least $
(employer must insert an amount that is $5,000 or less) in
compensation for the year.

III. Administrative Procedures
To start or change your salary reduction contributions, you must complete the salary reduction agreement and return it to
(employer should designate a place or
individual) by
(employer should insert a date that is not less than 60 days after notice is given).

Model Salary Reduction Agreement
I. Salary Reduction Election
Subject to the requirements of the SIMPLE IRA plan of
(name of
employer) I authorize
(which equals
% or $
% of my current rate of pay) to be withheld from
my pay for each pay period and contributed to my SIMPLE IRA as a salary reduction contribution.

II. Maximum Salary Reduction
I understand that the total amount of my salary reduction contributions in any calendar year cannot exceed the applicable
amount for that year. See instructions.

III. Date Salary Reduction Begins
I understand that my salary reduction contributions will start as soon as permitted under the SIMPLE IRA plan and as soon as
administratively feasible or, if later,
. (Fill in the date you want the salary reduction contributions to
begin. The date must be after you sign this agreement.)

IV. Duration of Election
This salary reduction agreement replaces any earlier agreement and will remain in effect as long as I remain an eligible employee
under the SIMPLE IRA plan or until I provide my Employer with a request to end my salary reduction contributions or provide a
new salary reduction agreement as permitted under this SIMPLE IRA plan.
Signature of employee

Date

* This is the amount for 2012. For later years, the limit may be increased for cost-of-living adjustments. The IRS announces the increase, if any, in a news release, in
the Internal Revenue Bulletin, and on the IRS website at IRS.gov.

Form 5305-SIMPLE (Rev. 3-2012)

Form 5305-SIMPLE (Rev. 3-2012)

General Instructions
Section references are to the Internal
Revenue Code unless otherwise noted.

Purpose of Form
Form 5305-SIMPLE is a model Savings
Incentive Match Plan for Employees of
Small Employers (SIMPLE) plan
document that an employer may use in
combination with SIMPLE IRAs to
establish a SIMPLE IRA plan described
in section 408(p).
These instructions are designed to
assist in the establishment and
administration of the SIMPLE IRA plan.
They are not intended to supersede any
provision in the SIMPLE IRA plan.
Do not file Form 5305-SIMPLE with
the IRS. Instead, keep it with your
records.
For more information, see Pub. 560,
Retirement Plans for Small Business
(SEP, SIMPLE, and Qualified Plans), and
Pub. 590, Individual Retirement
Arrangements (IRAs).
Note. If you used the March 2002, August
2005, or September 2008 version of Form
5305-SIMPLE to establish a model
Savings Incentive Match Plan, you are not
required to use this version of the form.

Instructions for the
Employer
Which Employers May
Establish and Maintain a
SIMPLE IRA Plan?
To establish and maintain a SIMPLE IRA
plan, you must meet both of the
following requirements:
1. Last calendar year, you had no
more than 100 employees (including
self-employed individuals) who earned
$5,000 or more in compensation from
you during the year. If you have a
SIMPLE IRA plan but later exceed this
100-employee limit, you will be treated
as meeting the limit for the 2 years
following the calendar year in which you
last satisfied the limit.
2. You do not maintain during any part
of the calendar year another qualified
plan with respect to which contributions
are made, or benefits are accrued, for
service in the calendar year. For this
purpose, a qualified plan (defined in
section 219(g)(5)) includes a qualified
pension plan, a profit-sharing plan, a
stock bonus plan, a qualified annuity
plan, a tax-sheltered annuity plan, and a
simplified employee pension (SEP) plan.
A qualified plan that only covers
employees covered under a collective
bargaining agreement for which
retirement benefits were the subject of
good faith bargaining is disregarded if

Page

these employees are excluded from
participating in the SIMPLE IRA plan.
If the failure to continue to satisfy the
100-employee limit or the one-plan rule
described in 1 or 2 above is due to an
acquisition or similar transaction
involving your business, special rules
apply. Consult your tax advisor to find
out if you can still maintain the plan after
the transaction.
Certain related employers (trades or
businesses under common control) must
be treated as a single employer for
purposes of the SIMPLE requirements.
These are:
(1) a controlled group of corporations
under section 414(b);
(2) a partnership or sole proprietorship
under common control under section
414(c); or
(3) an affiliated service group under
section 414(m). In addition, if you have
leased employees required to be treated
as your own employees under the rules
of section 414(n), then you must count
all such leased employees for the
requirements listed above.

What Is a SIMPLE IRA Plan?
A SIMPLE IRA plan is a written
arrangement that provides you and your
employees with an easy way to make
contributions to provide retirement
income for your employees. Under a
SIMPLE IRA plan, employees may
choose whether to make salary
reduction contributions to the SIMPLE
IRA plan rather than receiving these
amounts as part of their regular
compensation. In addition, you will
contribute matching or nonelective
contributions on behalf of eligible
employees (see Employee Eligibility
Requirements below and Contributions
later). All contributions under this plan
will be deposited into a SIMPLE
individual retirement account or annuity
established for each eligible employee
with the designated financial institution
named in Article VII.

When To Use Form
5305-SIMPLE
A SIMPLE IRA plan may be established
by using this Model Form or any other
document that satisfies the statutory
requirements.
Do not use Form 5305-SIMPLE if:
1. You want to permit each of your
eligible employees to choose a financial
institution that will initially receive
contributions. Instead, use Form
5304-SIMPLE, Savings Incentive Match
Plan for Employees of Small Employers
(SIMPLE)—Not for Use With a
Designated Financial Institution;
2. You want employees who are
nonresident aliens receiving no earned

4

income from you that is income from
sources within the United States to be
eligible under this plan; or
3. You want to establish a SIMPLE
401(k) plan.

Completing Form
5305-SIMPLE
Pages 1 and 2 of Form 5305-SIMPLE
contain the operative provisions of your
SIMPLE IRA plan. This SIMPLE IRA plan
is considered adopted when you have
completed all appropriate boxes and
blanks and it has been executed by you
and the designated financial institution.
The SIMPLE IRA plan is a legal
document with important tax
consequences for you and your
employees. You may want to consult
with your attorney or tax advisor before
adopting this plan.

Employee Eligibility
Requirements (Article I)
Each year for which this SIMPLE IRA plan
is effective, you must permit salary
reduction contributions to be made by all
of your employees who are reasonably
expected to receive at least $5,000 in
compensation from you during the year,
and who received at least $5,000 in
compensation from you in any 2
preceding years. However, you can
expand the group of employees who are
eligible to participate in the SIMPLE IRA
plan by completing the options provided
in Article I, items 1a and 1b. To choose
full eligibility, check the box in Article I,
item 1a. Alternatively, to choose limited
eligibility, check the box in Article I, item
1b, and then insert “$5,000” or a lower
compensation amount (including zero)
and “2” or a lower number of years of
service in the blanks in (i) and (ii) of Article
I, item 1b.
In addition, you can exclude from
participation those employees covered
under a collective bargaining agreement
for which retirement benefits were the
subject of good faith bargaining. You
may do this by checking the box in
Article I, item 2. Under certain
circumstances, these employees must
be excluded. See Which Employers May
Establish and Maintain a SIMPLE IRA
Plan? earlier.

Salary Reduction
Agreements (Article II)
As indicated in Article II, item 1, a salary
reduction agreement permits an eligible
employee to make an election to have
his or her compensation for each pay
period reduced by a percentage
(expressed as a percentage or dollar
amount). The total amount of the
reduction in the employee’s
compensation cannot exceed the

Form 5305-SIMPLE (Rev. 3-2012)

applicable amount for any calendar year.
The applicable amount is $11,500 for
2012. After 2012, the $11,500 amount
may be increased for cost-of-living
adjustments. In the case of an eligible
employee who is 50 or older by the end
of the calendar year, the above limitation
is increased by $2,500 for 2012. After
2012, the $2,500 amount may be
increased for cost-of-living adjustments.

Timing of Salary Reduction
Elections
For a calendar year, an eligible employee
may make or modify a salary reduction
election during the 60-day period
immediately preceding January 1 of that
year. However, for the year in which the
employee becomes eligible to make
salary reduction contributions, the period
during which the employee may make or
modify the election is a 60-day period
that includes either the date the
employee becomes eligible or the day
before.
You can extend the 60-day election
periods to provide additional
opportunities for eligible employees to
make or modify salary reduction
elections using the blank in Article II,
item 2b. For example, you can provide
that eligible employees may make new
salary reduction elections or modify prior
elections for any calendar quarter during
the 30 days before that quarter.
You may use the Model Salary
Reduction Agreement on page 3 to
enable eligible employees to make or
modify salary reduction elections.
Employees must be permitted to
terminate their salary reduction elections
at any time. They may resume salary
reduction contributions for the year if
permitted under Article II, item 2b.
However, by checking the box in Article
II, item 2d, you may prohibit an
employee who terminates a salary
reduction election outside the normal
election cycle from resuming salary
reduction contributions during the
remainder of the calendar year.

Contributions (Article III)
Only contributions described below may
be made to this SIMPLE IRA plan. No
additional contributions may be made.

Salary Reduction Contributions
As indicated in Article III, item 1, salary
reduction contributions consist of the
amount by which the employee agrees
to reduce his or her compensation. You
must contribute the salary reduction
contributions to the designated financial
institution for the employee’s SIMPLE
IRA.

Page

Matching Contributions
In general, you must contribute a
matching contribution to each eligible
employee’s SIMPLE IRA equal to the
employee’s salary reduction
contributions. This matching contribution
cannot exceed 3% of the employee’s
compensation. See Definition of
Compensation later.
You may reduce this 3% limit to a
lower percentage, but not lower than
1%. You cannot lower the 3% limit for
more than 2 calendar years out of the
5-year period ending with the calendar
year the reduction is effective.
Note. If any year in the 5-year period
described above is a year before you
first established any SIMPLE IRA plan,
you will be treated as making a 3%
matching contribution for that year for
purposes of determining when you may
reduce the employer matching
contribution.
To elect this option, you must notify
the employees of the reduced limit within
a reasonable period of time before the
applicable 60-day election periods for
the year. See Timing of Salary Reduction
Elections earlier.

Nonelective Contributions
Instead of making a matching
contribution, you may, for any year,
make a nonelective contribution equal to
2% of compensation for each eligible
employee who has at least $5,000 in
compensation for the year. Nonelective
contributions may not be based on more
than $250,000* of compensation.
To elect to make nonelective
contributions, you must notify employees
within a reasonable period of time before
the applicable 60-day election periods
for such year. See Timing of Salary
Reduction Elections earlier.
Note. Insert “$5,000” in Article III, item
2b(i) to impose the $5,000 compensation
requirement. You may expand the group
of employees who are eligible for
nonelective contributions by inserting a
compensation amount lower than
$5,000.

Effective Date (Article VII)
Insert in Article VII the date you want the
provisions of the SIMPLE IRA plan to
become effective. You must insert
January 1 of the applicable year unless
this is the first year for which you are
adopting any SIMPLE IRA plan. If this is
the first year for which you are adopting
a SIMPLE IRA plan, you may insert any
date between January 1 and October 1,
inclusive of the applicable year.

Additional Information
Timing of Salary Reduction
Contributions
The employer must make the salary
reduction contributions to the
designated financial institution for the
SIMPLE IRAs of all eligible employees
no later than the 30th day of the month
following the month in which the
amounts would otherwise have been
payable to the employee in cash.
The Department of Labor has
indicated that most SIMPLE IRA plans
are also subject to Title I of the
Employee Retirement Income Security
Act of 1974 (ERISA). Under Department
of Labor regulations, at 29 CFR
2510.3-102, salary reduction
contributions must be made to the
SIMPLE IRA at the designated financial
institution as of the earliest date on
which those contributions can
reasonably be segregated from the
employer’s general assets, but in no
event later than the 30-day deadline
described previously.

Definition of Compensation
“Compensation” means the amount
described in section 6051(a)(3) (wages,
tips, and other compensation from the
employer subject to federal income tax
withholding under section 3401(a)), and
amounts paid for domestic service in a
private home, local college club, or local
chapter of a college fraternity or sorority.
Usually, this is the amount shown in box
1 of Form W-2, Wage and Tax
Statement. For further information, see
Pub. 15, Circular E, Employer’s Tax
Guide. Compensation also includes the
salary reduction contributions made
under this plan, and, if applicable,
compensation deferred under a section
457 plan. In determining an employee’s
compensation for prior years, the
employee’s elective deferrals under a
section 401(k) plan, a SARSEP, or a
section 403(b) annuity contract are also
included in the employee’s
compensation.
For self-employed individuals,
compensation means the net earnings
from self-employment determined under
section 1402(a), without regard to
section 1402(c)(6), prior to subtracting
any contributions made pursuant to this
SIMPLE IRA plan on behalf of the
individual.

* This is the amount for 2012. For later years, the limit may be increased for cost-of-living adjustments. The IRS announces the increase, if any, in a news release, in
the Internal Revenue Bulletin, and on the IRS’s website at IRS.gov.

5

Form 5305-SIMPLE (Rev. 3-2012)

Employee Notification
You must notify eligible employees prior
to the employees’ 60-day election period
described previously that they can make
or change salary reduction elections. In
this notification, you must indicate
whether you will provide:
1. A matching contribution equal to
your employees’ salary reduction
contributions up to a limit of 3% of their
compensation;
2. A matching contribution equal to
your employees’ salary reduction
contributions subject to a percentage
limit that is between 1 and 3% of their
compensation; or
3. A nonelective contribution equal to
2% of your employees’ compensation.
You can use the Model Notification to
Eligible Employees to satisfy these
employee notification requirements for
this SIMPLE IRA plan. A Summary
Description must also be provided to
eligible employees at this time. This
summary description requirement may
be satisfied by providing a completed
copy of pages 1 and 2 of Form
5305-SIMPLE (including the Article VI
Procedures for Withdrawals and
Transfers from the SIMPLE IRAs
established under this SIMPLE IRA plan).
If you fail to provide the employee
notification (including the summary
description) described above, you will be
liable for a penalty of $50 per day until
the notification is provided. If you can
show that the failure was due to
reasonable cause, the penalty will not be
imposed.

Reporting Requirements
You are not required to file any annual
information returns for your SIMPLE IRA
plan, such as Form 5500, Annual
Return/Report of Employee Benefit Plan
or Form 5500-EZ, Annual Return of
One-Participant (Owners and Their
Spouses) Retirement Plan. However, you
must report to the IRS which eligible
employees are active participants in the
SIMPLE IRA plan and the amount of
your employees’ salary reduction
contributions to the SIMPLE IRA plan on
Form W-2. These contributions are
subject to social security, Medicare,
railroad retirement, and federal
unemployment tax.

Deducting Contributions
Contributions to this SIMPLE IRA plan
are deductible in your tax year
containing the end of the calendar year
for which the contributions are made.

Page

Contributions will be treated as made
for a particular tax year if they are made
for that year and are made by the due
date (including extensions) of your
income tax return for that year.

Choosing the Designated
Financial Institution
As indicated in Article V, item 4, a
designated financial institution is a
trustee, custodian, or insurance
company (that issues annuity contracts)
for the SIMPLE IRA plan that would
receive all contributions made pursuant
to the SIMPLE IRA plan and deposit the
contributions to the SIMPLE IRA of each
eligible employee.
Only certain financial institutions, such
as banks, savings and loan associations,
insured credit unions, insurance
companies (that issue annuity contracts),
or IRS-approved nonbank trustees may
serve as a designated financial institution
under a SIMPLE IRA plan.
You are not required to choose a
designated financial institution for your
SIMPLE IRA plan. However, if you do not
want to choose a designated financial
institution, you cannot use this form (see
When To Use Form 5305-SIMPLE
earlier).

Instructions for the
Designated Financial
Institution
Completing Form
5305-SIMPLE
By completing Article VII, you have
agreed to be the designated financial
institution for this SIMPLE IRA plan. You
agree to maintain IRAs on behalf of all
individuals receiving contributions under
the plan and to receive all contributions
made pursuant to this plan and to
deposit those contributions to the
SIMPLE IRAs of each eligible employee
as soon as practicable. You also agree
that upon the request of a participant,
you will transfer the participant’s balance
in a SIMPLE IRA to another IRA without
cost or penalty to the participant.

Summary Description
Each year the SIMPLE IRA plan is in
effect, you must provide the employer
the information described in section
408(l)(2)(B). This requirement may be
satisfied by providing the employer a
current copy of Form 5305-SIMPLE
(including instructions) together with your

6

procedures for withdrawals and transfers
from the SIMPLE IRAs established under
this SIMPLE IRA plan. The summary
description must be received by the
employer in sufficient time to comply
with the Employee Notification
requirements on this page.
If you fail to provide the summary
description described above, you will be
liable for a penalty of $50 per day until
the notification is provided. If you can
show that the failure was due to
reasonable cause, the penalty will not be
imposed.
Paperwork Reduction Act Notice. You
are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records
relating to a form or its instructions must
be retained as long as their contents
may become material in the
administration of any Internal Revenue
law. Generally, tax returns and return
information are confidential, as required
by section 6103.
The time needed to complete this
form will vary depending on individual
circumstances. The estimated average
time is:
Recordkeeping .

.

.

. 3 hr., 38 min.

Learning about the
law or the form . .

.

. 2 hr., 26 min.

Preparing the form

.

.

.

. 47 min.

If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form
simpler, we would be happy to hear
from you. You can write to the Internal
Revenue Service, Tax Products
Coordinating Committee,
SE:W:CAR:MP:T:M:S, 1111 Constitution
Ave. NW, IR-6526, Washington, DC
20224. Do not send this form to this
address. Instead, keep it for your
records.