IRS 5304-SIMPLE PDF Template

The IRS 5304-SIMPLE form is a document used by employers to set up a Savings Incentive Match Plan for Employees (SIMPLE) IRA. This form outlines the plan’s features and allows employees to make salary deferral contributions. To get started on filling out the form, click the button below.

Article Guide

The IRS 5304-SIMPLE form plays a crucial role for small businesses looking to establish a Savings Incentive Match Plan for Employees, commonly known as a SIMPLE IRA. This form is designed to help employers set up a retirement savings plan that is easy to administer and beneficial for both employers and employees. It outlines the necessary steps for the employer to notify eligible employees about the plan and provides essential information regarding contribution limits, eligibility criteria, and the matching contributions that employers can make. By using this form, businesses can offer their employees a straightforward way to save for retirement, ensuring that they have the opportunity to build a secure financial future. Additionally, the form helps clarify the responsibilities of both the employer and the employees, fostering a transparent and supportive environment for retirement planning. Understanding the IRS 5304-SIMPLE form is vital for any small business owner aiming to enhance their employee benefits package while promoting long-term financial wellness for their workforce.

IRS 5304-SIMPLE Preview

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)

1General 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):


a	Full Eligibility. All employees are eligible.
b	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 $			in compensation
	(ii)	(not to exceed $5,000) for the calendar year.
	(ii)	Prior compensation. Employees who have received at least $		in compensation (not to exceed $5,000)
		during any	calendar year(s) (insert 0, 1, or 2) preceding the calendar year.

2Excludable 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.

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

1Salary 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.

2Timing of Salary Reduction Elections

aFor 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.

cNo 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.

dAn 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)

1Salary 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.

2 a 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).

bNonelective 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).

3Time and Manner of Contributions

aThe 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.

bThe 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

1Contributions 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).

2Vesting Requirements. All contributions made under this SIMPLE IRA plan are fully vested and nonforfeitable.

3No 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.

4Selection 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.

5Amendments 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.

6Effects Of Withdrawals and Rollovers

aAn 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.

bIf 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

1Compensation

aGeneral 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)).

bCompensation 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.

2Employee. 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.

3Eligible 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.

4SIMPLE 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				. See
instructions.
*	*	*	*	*

Name of Employer		By:	Signature	Date

Address of Employer		Name and title

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 theSIMPLE 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.
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)

Page 4

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

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;

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)

Page 5

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

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.

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 financial institution selected by each eligible employee.

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.

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.

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.

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 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)

Page 6

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.

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.

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.

↓ IRS 5304-SIMPLE

File Properties

Fact Name	Description
Purpose	The IRS 5304-SIMPLE form is used to establish a SIMPLE IRA plan for eligible employees and employers.
Eligibility	Employers with 100 or fewer employees who earned $5,000 or more in the preceding year can use this form.
Contribution Limits	For 2023, employees can contribute up to $15,500, with an additional catch-up contribution of $3,500 for those aged 50 and over.
Employer Contributions	Employers must either match employee contributions up to 3% of compensation or contribute 2% of each eligible employee's compensation.
Filing Deadline	The form must be completed and provided to eligible employees by October 1 of the year the plan is established.
State-Specific Forms	Some states may have specific requirements or additional forms related to SIMPLE IRA plans, governed by state laws.
Tax Benefits	Contributions to a SIMPLE IRA are made pre-tax, reducing taxable income for employees and offering tax-deferred growth.
Withdrawal Rules	Withdrawals before age 59½ may incur a penalty, and specific rules apply regarding distributions and rollovers.

Instructions on Utilizing IRS 5304-SIMPLE

Filling out the IRS 5304-SIMPLE form is an important step for employers who want to establish a SIMPLE IRA plan for their employees. Completing this form correctly ensures compliance with IRS regulations and sets the stage for a successful retirement savings plan.

Begin by downloading the IRS 5304-SIMPLE form from the IRS website or obtaining a physical copy.
At the top of the form, enter the name of your business and the business address.
Provide the tax identification number (TIN) for your business in the designated field.
Indicate the year for which the form is being filled out.
In Section 1, select the type of SIMPLE IRA plan you are establishing (either a salary reduction or a non-elective contribution plan).
Complete Section 2 by providing information about the employees eligible to participate in the plan.
In Section 3, specify the contribution amounts that you will make to the SIMPLE IRA plan for each eligible employee.
Sign and date the form at the bottom, certifying that the information provided is accurate and complete.
Make copies of the completed form for your records and distribute copies to your employees.

Once the form is filled out, it should be submitted to the IRS and kept on file for your records. Be sure to communicate with your employees about their options and the benefits of participating in the SIMPLE IRA plan.

Important Facts about IRS 5304-SIMPLE

What is the IRS 5304-SIMPLE form?

The IRS 5304-SIMPLE form is used by employers to establish a Savings Incentive Match Plan for Employees (SIMPLE) IRA. This plan allows employees to contribute to their retirement savings while also providing matching contributions from their employer. The form outlines the terms of the plan and must be provided to employees who are eligible to participate.

Who is eligible to use the IRS 5304-SIMPLE form?

Employers with 100 or fewer employees who earned $5,000 or more in compensation during the preceding calendar year can use the IRS 5304-SIMPLE form. Employees must also meet certain criteria, such as having received at least $5,000 in compensation from the employer during any two preceding years and expecting to receive at least that amount in the current year.

What information is required on the IRS 5304-SIMPLE form?

The form requires basic information about the employer, including the name, address, and tax identification number. It also includes details about the plan, such as the contribution limits, the matching contribution formula, and the eligibility requirements for employees. Employers must also specify the plan year and any other relevant provisions.

How does the SIMPLE IRA plan work?

Under a SIMPLE IRA plan, employees can choose to contribute a portion of their salary to the plan. Employers are required to either match employee contributions up to a certain percentage or make a fixed contribution for all eligible employees. Contributions are made on a pre-tax basis, which can reduce taxable income for employees.

What are the contribution limits for a SIMPLE IRA?

For 2023, employees can contribute up to $15,500 to their SIMPLE IRA. If an employee is age 50 or older, they may make an additional catch-up contribution of $3,500. Employers can match contributions up to 3% of an employee's compensation or make a fixed contribution of 2% for all eligible employees.

When must the IRS 5304-SIMPLE form be provided to employees?

Employers must provide the IRS 5304-SIMPLE form to eligible employees before the start of the plan year. This allows employees to review the plan details and decide whether they want to participate. It is important to ensure that all eligible employees receive the form in a timely manner.

Can an employer change the terms of the SIMPLE IRA plan?

Yes, an employer can change certain terms of the SIMPLE IRA plan, but they must notify employees of any changes. Changes may include adjusting the contribution limits, modifying the matching formula, or altering eligibility requirements. Employers should ensure that any changes comply with IRS regulations.

What are the tax implications of a SIMPLE IRA?

Contributions to a SIMPLE IRA are made on a pre-tax basis, which means they reduce the employee's taxable income for the year. Taxes are paid when funds are withdrawn from the account, typically during retirement. Employers may also be eligible for tax deductions for their contributions, subject to IRS rules.

Where can I find the IRS 5304-SIMPLE form?

The IRS 5304-SIMPLE form can be found on the official IRS website. It is available for download in PDF format. Employers should ensure they are using the most current version of the form to comply with IRS requirements.

Common mistakes

Filling out the IRS 5304-SIMPLE form can be a straightforward process, but many individuals make common mistakes that can lead to complications. One frequent error is failing to provide complete information. Omitting details such as the employer's name, address, or tax identification number can delay processing and create confusion. It’s essential to double-check all fields before submitting the form.

Another mistake often seen is not adhering to the deadlines. The IRS has specific timelines for when the form must be submitted, and missing these deadlines can result in penalties or the inability to establish a SIMPLE IRA plan for that year. Keeping track of these important dates is crucial for compliance.

Many individuals also misunderstand the eligibility requirements for participating in a SIMPLE IRA. Some mistakenly assume that all employees qualify, but there are specific criteria that must be met. Ensuring that all eligible employees are accounted for is vital to avoid issues down the line.

Incorrectly calculating employee contributions is another common pitfall. The form requires accurate calculations of both employee and employer contributions. Errors in these figures can lead to excess contributions, which may incur additional taxes and penalties. Taking the time to verify these calculations can save headaches later.

People sometimes overlook the importance of signing the form. A signature is a crucial part of the submission process. Without it, the form is considered incomplete, which can lead to delays in establishing the SIMPLE IRA. Always remember to sign and date the form before sending it off.

Another mistake is not keeping copies of the submitted form. It’s wise to retain a copy for your records, as this can be helpful for future reference or in case of an audit. Having documentation on hand can provide clarity and support when needed.

Finally, individuals often fail to review the instructions thoroughly. The IRS provides detailed guidelines for filling out the form, and skipping this step can lead to misunderstandings. Taking the time to read through the instructions can help clarify any uncertainties and ensure that the form is completed correctly.

Documents used along the form

The IRS 5304-SIMPLE form is a crucial document used by employers to establish a Savings Incentive Match Plan for Employees (SIMPLE) IRA. This form allows eligible employers to offer a retirement savings plan that benefits both employees and the employer. Alongside this form, several other documents are often utilized to ensure compliance and proper administration of the SIMPLE IRA plan. Below is a list of commonly associated forms and documents.

IRS Form 5305-SIMPLE: This form serves as the basic plan document for establishing a SIMPLE IRA. It outlines the terms of the plan and must be completed by the employer.
IRS Form 5498: This form is used by the trustee or custodian of the SIMPLE IRA to report contributions made to the account. It provides important information about the account balance and contributions for tax purposes.
IRS Form 1099-R: This document is issued to report distributions from the SIMPLE IRA. It is essential for both the employee and the IRS to track withdrawals and ensure proper taxation.
Employee Enrollment Form: This internal document allows employees to enroll in the SIMPLE IRA plan. It typically includes personal information and contribution choices.
Plan Summary Description: This document provides a summary of the SIMPLE IRA plan, including eligibility, contribution limits, and withdrawal rules. It is crucial for employee understanding and compliance.
Employer Adoption Agreement: This agreement is signed by the employer to formally adopt the SIMPLE IRA plan. It includes details about the employer's contributions and the plan's operation.

Each of these documents plays a vital role in the establishment and maintenance of a SIMPLE IRA plan. They ensure that both employers and employees understand their rights and responsibilities, facilitating a smooth retirement savings process.

Similar forms

The IRS 5304-SIMPLE form is a document used by employers to establish a SIMPLE IRA plan for their employees. This form shares similarities with several other documents related to retirement plans and employee benefits. Below are five documents that are comparable to the IRS 5304-SIMPLE form, along with a brief explanation of how they are similar.

IRS Form 5305-SEP: This form is used to establish a Simplified Employee Pension (SEP) plan. Like the 5304-SIMPLE, it allows employers to set up a retirement plan that is easy to administer and requires minimal paperwork.
IRS Form 5500: This form is an annual report that employee benefit plans must file. Similar to the 5304-SIMPLE, it provides essential information about the plan's financial condition, investments, and operations, ensuring transparency and compliance.
IRS Form 8880: This form is used to claim the Retirement Savings Contributions Credit. It is similar in that it encourages retirement savings among employees, providing tax benefits for contributions made to retirement accounts.
IRS Form 1099-R: This form reports distributions from retirement plans. Like the 5304-SIMPLE, it is part of the broader framework of retirement planning and helps ensure that both employers and employees are aware of tax implications related to retirement savings.
IRS Form 401(k) Plan Document: This document outlines the specifics of a 401(k) retirement plan. Similar to the 5304-SIMPLE, it establishes the rules and regulations governing employee contributions, employer matching, and withdrawals, thereby facilitating retirement savings.

Dos and Don'ts

When filling out the IRS 5304-SIMPLE form, it's important to follow specific guidelines to ensure accuracy and compliance. Here’s a list of things you should and shouldn’t do:

Do read the instructions carefully before starting. Understanding the requirements can save time and prevent mistakes.
Do provide accurate information. Double-check names, addresses, and other details to ensure they are correct.
Do use clear and legible handwriting if filling out the form by hand. If your writing is hard to read, it may lead to processing delays.
Do keep a copy of the completed form for your records. This will be useful for future reference or in case of any discrepancies.

Don’t leave any required fields blank. Incomplete forms may be rejected or delayed in processing.
Don’t forget to sign and date the form. An unsigned form is considered invalid and will not be processed.
Don’t use a pencil. Always use blue or black ink to ensure that the form is properly processed.
Don’t submit the form late. Adhering to deadlines is crucial to avoid penalties or issues with your SIMPLE IRA plan.

Misconceptions

The IRS 5304-SIMPLE form is often misunderstood. Here are seven common misconceptions about this form, along with clarifications to help you understand its purpose and use.

The IRS 5304-SIMPLE form is only for large businesses. This form is designed specifically for small businesses that want to establish a SIMPLE IRA plan for their employees. It is not limited to large companies.
You must offer a SIMPLE IRA to all employees. While the form is used to set up a SIMPLE IRA plan, employers are not required to offer it to every employee. Eligibility criteria can be established based on factors like age and tenure.
The IRS 5304-SIMPLE form is complicated. Although it may seem daunting, the form is straightforward. It requires basic information about the employer and the plan, making it accessible for most small business owners.
While contributions to a SIMPLE IRA can be tax-deductible, completing the form does not automatically ensure deductions. Proper tax filing and adherence to IRS guidelines are necessary.
The IRS 5304-SIMPLE form is primarily focused on retirement savings, but it also serves to outline the employer's commitment to employee financial wellness, which can enhance job satisfaction.
After submitting the form, employers must also communicate the plan details to employees and ensure ongoing compliance with IRS regulations.
Employers can update or change their SIMPLE IRA plans as needed. If modifications are necessary, a new form can be submitted to reflect those changes.

Understanding these misconceptions can help small business owners make informed decisions regarding their retirement plans and employee benefits.

Key takeaways

The IRS 5304-SIMPLE form is essential for setting up a SIMPLE IRA plan for eligible employees. Here are some key takeaways to keep in mind:

The form is used by employers to inform employees about the SIMPLE IRA plan and its features.
It must be provided to employees before the start of the plan year, ensuring they have adequate time to understand their options.
Employers need to choose between matching contributions or non-elective contributions, which affects how the plan will be funded.
Employees can decide how much to contribute, but there are annual limits set by the IRS that must be followed.
Proper completion of the form is crucial, as it helps ensure compliance with IRS regulations and protects both employer and employee interests.