Federal Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)--Not for Use With a Designated Financial Institution

Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)--Not for Use With a Designated Financial Institution
Form 5304-SIMPLE (Rev. March 2012)
Form

5304-SIMPLE

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

Savings Incentive Match Plan
for Employees of Small Employers (SIMPLE)—Not
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)
General Eligibility Requirements. The Employer agrees to permit salary reduction contributions to be made in each calendar year to the
SIMPLE IRA established by each employee who meets the following requirements (select either 1a or 1b):

1
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 $
(not to exceed $5,000) for the calendar year.
(ii) Prior compensation. Employees who have received at least $

in compensation
in compensation (not to exceed $5,000)

during any
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)
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.
Timing of Salary Reduction Elections

1
2
a

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.

b

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 (for example, 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) for each eligible employee to the SIMPLE IRA established at the financial
institution selected by that employee 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) for each eligible employee to the SIMPLE
IRA established at the financial institution selected by that employee 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 the instructions.

Cat. No. 23377W

Form

5304-SIMPLE

(Rev. 3-2012)

Form 5304-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

Selection of IRA Trustee. The Employer must permit each eligible employee to select the financial institution that will serve as the trustee,
custodian, or issuer of the SIMPLE IRA to which the Employer will make all contributions on behalf of that employee.

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 under 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
1

Compensation
a

General Definition of Compensation. Compensation means the sum of the 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

SIMPLE IRA. A SIMPLE IRA is an individual retirement account described in section 408(a), or an individual retirement annuity described in
section 408(b), to which the only contributions that can be made are contributions under a SIMPLE IRA plan and rollovers or transfers from
another SIMPLE IRA.

Article VI—Procedures for Withdrawals (The Employer will provide each employee with the procedures for withdrawals
of contributions received by the financial institution selected by that employee, and that financial institution’s name and
address (by attaching that information or inserting it in the space below) unless: (1) that financial institution’s procedures
are unavailable, or (2) that financial institution provides the procedures directly to the employee. See Employee
Notification in the instructions.)

Article VII—Effective Date
This SIMPLE IRA plan is effective
instructions.

. See

*

*

*

*

Name of Employer

By:

Address of Employer

Name and title

*

Date

Signature

Form

5304-SIMPLE

(Rev. 3-2012)

Form 5304-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
calendar year, the Employer elects to contribute to your SIMPLE IRA (employer must select either (1), (2), or (3)):
(1) A matching contribution equal to your salary reduction contributions up to a limit of 3% of your compensation for the year;
(2) A matching contribution equal to your salary reduction contributions up to a limit of
% (employer must insert a
number from 1 to 3 and is subject to certain restrictions) of your compensation for the year; or
(3) 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).

IV.

Employee Selection of Financial Institution

You must select the financial institution that will serve as the trustee, custodian, or issuer of your SIMPLE IRA and notify your Employer of
your selection.

Model Salary Reduction Agreement
I.

Salary Reduction Election

Subject to the requirements of the SIMPLE IRA plan of
(name of
employer) I authorize
% or $
(which equals
% 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.

Employee Selection of Financial Institution

I select the following financial institution to serve as the trustee, custodian, or issuer of my SIMPLE IRA.

Name of financial institution
Address of financial institution
SIMPLE IRA account name and number

I understand that I must establish a SIMPLE IRA to receive any contributions made on my behalf under this SIMPLE IRA plan. If the
information regarding my SIMPLE IRA is incomplete when I first submit my salary reduction agreement, I realize that it must be completed by
the date contributions must be made under the SIMPLE IRA plan. If I fail to update my agreement to provide this information by that date, I
understand that my Employer may select a financial institution for my SIMPLE IRA.

V.

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

5304-SIMPLE

(Rev. 3-2012)

Form 5304-SIMPLE (Rev. 3-2012)

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

Purpose of Form
Form 5304-SIMPLE is a model Savings
Incentive Match Plan for Employees of
Small Employers (SIMPLE) plan
document that an employer may use to
establish a SIMPLE IRA plan described
in section 408(p), under which each
eligible employee is permitted to select
the financial institution for his or her
SIMPLE IRA.
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 5304-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 5304-SIMPLE to establish a
model Savings Incentive Match Plan,
you are not required to use this version
of the form.

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
these employees are excluded from

Page

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 and 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 IRA
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 financial institution selected by
him or her.

When To Use Form
5304-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 5304-SIMPLE if:
1. You want to require that all SIMPLE
IRA plan contributions initially go to a
financial institution designated by you.
That is, you do not want to permit each
of your eligible employees to choose a
financial institution that will initially
receive contributions. Instead, use Form
5305-SIMPLE, Savings Incentive Match
Plan for Employees of Small Employers
(SIMPLE)—for Use With a Designated
Financial Institution;

4

2. You want employees who are
nonresident aliens receiving no earned
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
5304-SIMPLE
Pages 1 and 2 of Form 5304-SIMPLE
contain the operative provisions of your
SIMPLE IRA plan. This SIMPLE IRA plan
is considered adopted when you have
completed all applicable boxes and
blanks and it has been executed by you.
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? above.

Salary Reduction
Agreements (Article II)
As indicated in Article II, item 1, a salary
reduction agreement permits an eligible
employee to make a salary reduction
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

Form 5304-SIMPLE (Rev. 3-2012)

the reduction in the employee’s
compensation cannot exceed the
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

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, below.
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.

For any 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.

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 above.

Contributions (Article III)

Effective Date (Article VII)

Only contributions described below may be
made to this SIMPLE IRA plan. No
additional contributions may be made.

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.

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 financial institution
selected by each eligible employee.

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 above.
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.

5

Additional Information
Timing of Salary Reduction
Contributions
The employer must make the salary
reduction contributions to the financial
institution selected by each eligible
employee for his or her SIMPLE IRA 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
each participant’s SIMPLE IRA 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.

Employee Notification
You must notify each eligible employee
prior to the employee’s 60-day election
period described above that he or she can
make or change salary reduction elections
and select the financial institution that will
serve as the trustee, custodian, or

*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.

Form 5304-SIMPLE (Rev. 3-2012)

issuer of the employee’s SIMPLE IRA. 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 earlier 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 5304-SIMPLE (including
the information described in
Article VI—Procedures for Withdrawals).
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.
If the financial institution’s name,
address, or withdrawal procedures are
not available at the time the employee
must be given the summary description,
you must provide the summary
description without this information. In
that case, you will have reasonable
cause for not including this information
in the summary description, but only if
you ensure that it is provided to the
employee as soon as administratively
feasible.

Page

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.
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.

Summary Description
Each year the SIMPLE IRA plan is in
effect, the financial institution for the
SIMPLE IRA of each eligible employee
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 5304-SIMPLE
(including instructions) together with the
financial institution’s procedures for
withdrawals from SIMPLE IRAs
established at that financial institution,
including the financial institution’s name
and address. The summary description
must be received by the employer in
sufficient time to comply with the
Employee Notification requirements
earlier.

6

There is a penalty of $50 per day
imposed on the financial institution for
each failure to provide the summary
description described above. However, if
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 with your
records.