Opening a SIMPLE IRA Plus

Any organization can establish a SIMPLE IRA Plus plan, including tax-exempt organizations and government entities, as long as the employer meets the following requirements:

• Has had 100 or fewer employees who earned $5,000 or more during the preceding year
• Considers all employees employed at any time during the calendar year who earned $5,000 or more during the preceding year. This rule includes:
  • Employees not eligible to participate
  • Self-employed individuals
  • Members of a controlled group
  • Leased employees
  • Union employees 
• Continues to meet the 100-employee limit each year the employer maintains the plan
• Maintains a SIMPLE IRA Plus plan only. The employer cannot have any other qualified plans, with the exception of a plan for collective bargaining employees.

Some states have minimum requirements for government-sponsored plans. Government entities must confirm that SIMPLE IRA Plus plans are acceptable plans under their applicable state statutes.

If the employer has never maintained a SIMPLE IRA Plus plan, the effective date can be any date between January 1 and October 1 of the applicable year. All subsequent plan years begin on January 1.

Yes, the plan sponsor can elect to offer Roth salary deferral contributions during the plan’s establishment or add the option after the plan is established by amending the existing plan, prior to the enrollment period for the following year.

For an easy, step-by-step guide to setting up a SIMPLE IRA Plus plan, visit Set up a SIMPLE IRA Plus plan.

Yes, the American Funds Target Date Retirement Series® is available and meets the requirements to be a QDIA.

Yes, SIMPLE IRA Plus offers 2 optional features to employers:

• Automatic enrollment
• Automatic escalation of contribution percentages
  
  

Employers must complete the SIMPLE IRA Plus Automatic Contribution Arrangement Amendment within the SIMPLE IRA Plus Plan Sponsor Guide to elect 1 or both features. 

A plan contact and a third-party remitter, if applicable, can be designated during establishment.

Once the plan has been established, an enrollment meeting should be scheduled. Employees must be allowed to enroll for 60 days after they are notified of the plan. This 60-day period usually begins after the enrollment meeting has concluded.

For an easy, step-by-step guide to setting up a SIMPLE IRA Plus plan, visit Set up a SIMPLE IRA Plus plan.

At the beginning of the 60-day enrollment period, distribute the following materials to all eligible employees:

• SIMPLE IRA Plus Employee Enrollment Guide
• Prospectuses
  
  

In addition, the SIMPLE IRA enrollment video and the Plan your journey to retirement (SIMPLE IRA) presentation are available to help employees understand the benefits of a SIMPLE IRA Plus plan.

Collect the completed SIMPLE IRA Plus Enrollment/Change forms, which are found in the guide, from employees.

Return the enrollment forms to the plan sponsor. If the $25 setup fee is not paid by the participant, it will be deducted from their account.

Eligible employees are added to the plan on the Plan sponsor website using the completed enrollment forms.

Generally, employees can participate if they:

• Received at least $5,000 a year in compensation during any 2 years before the current calendar year
• Are reasonably expected to earn at least $5,000 in the current calendar year
   

Employers may choose to make these limits less restrictive but may not make them more restrictive.

Employers may exclude employees who are:

• Union members covered by a collective bargaining agreement
• Nonresident aliens with no source of U.S. income

Once the employee meets the plan’s eligibility requirements, provide them with the SIMPLE IRA Plus Employee Enrollment Guide, applicable prospectuses and the following form and employee disclosures:

• Fee and Fund Disclosure
• Notification to Eligible Employees*
• A copy of the plan’s Summary Description*
• Automatic Contribution Arrangement Notice* (if applicable)
   

* The plan sponsor must complete these forms before providing them to the employee.

Once the employee completes the enrollment form, they should return it to the plan sponsor, who will enter the participant’s information on the Plan sponsor website to establish the new account.

Yes, your client will be charged a $25 setup fee per SIMPLE IRA Plus account type. If the $25 setup fee is not paid by the participant, it will be deducted from their account. In addition, there is a $25 annual fee per IRA account type charged each December.

Yes, if the minor has taxable compensation and meets all eligibility requirements:

• The account must be established using the minor’s Social Security number
• The enrollment form must be signed by the custodial parent or legal guardian
• The account is held in the name of the parent or legal guardian for the benefit of the minor

Yes, the employee can participate if they meet the plan’s eligibility requirements; however, they must also take an RMD.

Note: RMDs are not required from Roth assets during the employee’s lifetime.

No, a participant’s SIMPLE IRA Plus accounts generally cannot be linked with their other personal accounts. Most SIMPLE IRA Plus accounts are aggregated with other participant accounts that are part of the same plan or that are part of an employer-sponsored retirement plan offered by the same or an affiliated employer.

However, exceptions apply in the case of a sole proprietor whose only plan participants are:

• The owner
• Their spouse
• Their spouse equivalent, if recognized under local law
• Their children under the age of 21
• Disabled adult children with ABLEAmerica® accounts
   

For additional information on reducing the sales charge, refer to Share classes and breakpoints. For additional details on aggregating accounts, refer to the fund prospectus.

The process for naming beneficiaries on a SIMPLE IRA Plus account is different than for other IRAs. Once the account has been established by the plan sponsor, the participant must log in to their account in order to designate beneficiaries. 

Employers are required to make contributions via Automated Clearing House. When the plan is established, login information and instructions on how to make contributions using the Online Group Investments (OGI) website are emailed to the employer and plan contact.

The maximum contribution amounts vary each tax year. Refer to SIMPLE IRA Plus contributions for the current year’s limits.

Note: The maximum annual salary deferral contribution limit applies across both pretax and Roth deferrals.

The minimum amount is $25 per fund.

Yes, if the plan offers Roth salary deferral contributions. During enrollment, participants may use the SIMPLE IRA Plus Enrollment/Change form to elect salary deferral contributions.

The plan sponsor can elect to offer Roth salary deferral contributions during the plan’s establishment or add the option after the plan is established by amending the existing plan, prior to the enrollment period for the following year.

Yes, participants can make both pretax and Roth salary deferral contributions if the SIMPLE IRA Plus plan offers Roth salary deferral contributions and the participant elects both contribution types on the SIMPLE IRA Plus Enrollment/Change form.

Note: The maximum annual salary deferral contribution limit applies across both pretax and Roth deferrals.

Employer contributions for the current tax year must be made by the employer’s tax-filing deadline, including extensions.

Plans with fewer than 100 participants can follow a voluntary safe harbor rule that allows them to meet the plan asset rules if they deposit participant contributions within 7 business days of being withheld. If employers don’t meet the safe harbor standard, then they must comply by the earliest of the following 2 events when remitting deferrals:

• The earliest date that they can segregate the contributions from the company’s assets
• No later than 30 days after the end of the month in which the contributions have been withheld

Class R-3 shares are available for commission-based models, and Class R-5E shares are available for fee-based models. The availability of these share classes is dependent on what your dealer firm has approved.

Contact us for additional information.