The IRS SIMPLE IRA Amendment Initiative

A recent IRS announcement indicates that plan examinations the IRS has conducted have uncovered a large number of employers who failed to adopt an amended SIMPLE IRA document for 2001 tax law changes.  In most cases, the SIMPLE IRA plan was required to be amended by December 31, 2002.  As a result of these findings, the IRS has announced an amendment relief initiative specifically designed to bring the SIMPLE IRA plan into compliance.

Under this initiative, 190,000 employers with SIMPLE IRA plans have been identified by the IRS.  Starting in early March, employers with SIMPLE IRA programs will begin receiving an IRS letter reminding them of the 2002 plan amendment.  If the plan has yet to be amended, the IRS is giving the employer until December 31, 2006 to amend the plan.  Failure to amend by this date may result in the disqualification of the SIMPLE.

For more information on this SIMPLE IRA Amendment Initiative, click here to visit the IRS website.

Employers (and their advisors) may want to consider whether the SIMPLE IRA program is meeting all of their retirement plan needs.  In particular, the new Roth deferral feature may be a driving force behind the termination of a SIMPLE IRA program and the addition of a 401(k) plan. Roth contributions cannot be made to a SIMPLE IRA.

For more information of the new Roth 401(k) feature check out the Roth 401(k) tab on our website.

TSC does not offer SIMPLE IRA plans, our focus is on Qualified Retirement Plans, such as 401(k) plans. However, we are here to answer any questions you may have on the SIMPLE IRA amendment initiative and the Roth 401(k) plan. Click on the “Contact Us” tab for contact information.