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ComplianceTax & AccountingSeptember 26, 2022

SIMPLE IRA plans: Annual Summary Description and employer notification requirements


An employer that offers a Savings Incentive Match Plan to Employees of Small Employers (SIMPLE) IRA plan must provide an annual 60-day (or more) period within which employees can elect to make or modify a salary reduction agreement. For existing SIMPLE plans, this period is 60 days prior to the beginning of each calendar year, so the latest an election period can begin is November 2, continuing through December 31. Prior to the 60-day period, both the employer and the custodian/trustee must fulfill certain responsibilities for a SIMPLE plan to be established and maintained properly.

Custodian/trustee Summary Description requirement

Prior to the 60-day election period each year, the custodian/trustee of a SIMPLE IRA must provide a “Summary Description” to the employer sponsoring the ongoing SIMPLE IRA plan, which details the method and time for making elections, and the procedures for and effects of making withdrawals from a SIMPLE IRA. However, a custodian/trustee may meet its notification requirement by providing the employer with a current copy of the 5304-SIMPLE (or 5305-SIMPLE) and instructions, Procedures for Withdrawal, and the custodian’s/trustee’s name and address. Failure to properly provide the required information may result in a $50 penalty to the custodian/trustee for each day the failure continues unless reasonable cause can be shown.

Annual employer notification requirement

Also prior to each 60-day election period, an employer must communicate certain information about the SIMPLE IRA plan to its eligible employees. Along with the “Summary Description” from the custodian/trustee, an employer must provide written notice to each of its employees regarding the SIMPLE election rules. Most importantly, an employer’s annual notification informs the employees of the employer’s contribution choice (i.e., matching or nonelective) for the plan year, and gives each employee the opportunity to make a new, or modify an existing, salary deferral election.


Since the lack of communication between the custodian/trustee, employer, and employees could affect proper establishment as well as proper notice requirements, business owners should seek professional guidance for complete annual notification requirements. Why? Because each failure to properly provide the required information to employees could result in a $50 penalty for each day the failure continues unless reasonable cause can be shown—this time, to the employer!

For an opportunity to learn more about IRAs and other tax-advantaged accounts including Health Savings Accounts and Coverdell Education Savings Accounts, consider the Wolters Kluwer IRA Library or on-demand video training offered on a variety of topics. Go here to learn more about training opportunities available to you, or you can call us at 1-800-552-9408.
Mike Schiller
Manager, Specialized Consulting, Tax Advantaged Accounts
With more than 25 years of experience, Mike has worked closely with hundreds of financial organizations to help them create, implement, and maintain their tax-advantaged accounts program.
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