March 2017

Understanding What Forms Are Needed to Establish a SIMPLE IRA Plan And a SIMPLE IRA

Understanding What Forms Are Needed to Establish a

SIMPLE IRA Plan And a SIMPLE IRA

In order to establish its SIMPLE IRA plan, a sponsoring employer must execute either the IRS Model Form 5304-SIMPLE or the Form 5305-SIMPLE.

Each eligible employee must establish his/her own SIMPLE IRA to receive elective deferrals and the employer’s matching or non-elective contribution. The IRS has two model forms for this - a Form 5305-S (trust) and a Form 5305-SA (custodial).

CWF Form 941 uses/incorporates Form 5305-S. CWF Forms 940 and 942 use/incorporates the custodial version, Form 5305-SA.

These two forms do not discuss or reference what form the employer completed in order to establish its SIMPLE IRA plan. These forms authorize the trustee or the custodian to accept contributions made on behalf of a participant under the employer’s SIMPLE IRA plan.

Some IRA representatives are confused because the IRS does not have a 5304 version for an individual to establish his/her SIMPLE IRA.

One can see a person thinking the IRS might have another 5304 SIMPLE IRA form to be used by the individual, but this form has not been written by the IRS as the IRS does not think it is needed.