Form 5304-Simple - Savings Incentive Match Plan For Employees Of Small Employers (Simple) - Not For Use With A Designated Financial Institution Page 4
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Form 5304-SIMPLE (Rev. 3-2012)
Page
General Instructions
participating in the SIMPLE IRA plan. If
2. You want employees who are
the failure to continue to satisfy the
nonresident aliens receiving no earned
Section references are to the Internal
100-employee limit or the one-plan rule
income from you that is income from
Revenue Code unless otherwise noted.
described in 1 and 2 above is due to an
sources within the United States to be
acquisition or similar transaction
eligible under this plan; or
Purpose of Form
involving your business, special rules
3. You want to establish a SIMPLE
apply. Consult your tax advisor to find
Form 5304-SIMPLE is a model Savings
401(k) plan.
out if you can still maintain the plan after
Incentive Match Plan for Employees of
Completing Form
the transaction.
Small Employers (SIMPLE) plan
document that an employer may use to
5304-SIMPLE
Certain related employers (trades or
establish a SIMPLE IRA plan described
businesses under common control) must
Pages 1 and 2 of Form 5304-SIMPLE
in section 408(p), under which each
be treated as a single employer for
contain the operative provisions of your
eligible employee is permitted to select
purposes of the SIMPLE IRA
SIMPLE IRA plan. This SIMPLE IRA plan
the financial institution for his or her
requirements. These are: (1) a controlled
is considered adopted when you have
SIMPLE IRA.
group of corporations under section
completed all applicable boxes and
414(b); (2) a partnership or sole
These instructions are designed to
blanks and it has been executed by you.
proprietorship under common control
assist in the establishment and
under section 414(c); or (3) an affiliated
The SIMPLE IRA plan is a legal
administration of the SIMPLE IRA plan.
service group under section 414(m). In
document with important tax
They are not intended to supersede any
addition, if you have leased employees
consequences for you and your
provision in the SIMPLE IRA plan.
required to be treated as your own
employees. You may want to consult
Do not file Form 5304-SIMPLE with
employees under the rules of section
with your attorney or tax advisor before
the IRS. Instead, keep it with your
414(n), then you must count all such
adopting this plan.
records.
leased employees for the requirements
Employee Eligibility
For more information, see Pub. 560,
listed above.
Retirement Plans for Small Business
Requirements (Article I)
What Is a SIMPLE IRA Plan?
(SEP, SIMPLE, and Qualified Plans), and
Pub. 590, Individual Retirement
Each year for which this SIMPLE IRA
A SIMPLE IRA plan is a written
Arrangements (IRAs).
plan is effective, you must permit salary
arrangement that provides you and your
reduction contributions to be made by
Note. If you used the March 2002,
employees with an easy way to make
all of your employees who are
August 2005, or September 2008 version
contributions to provide retirement
reasonably expected to receive at least
of Form 5304-SIMPLE to establish a
income for your employees. Under a
$5,000 in compensation from you during
model Savings Incentive Match Plan,
SIMPLE IRA plan, employees may
the year, and who received at least
you are not required to use this version
choose whether to make salary
$5,000 in compensation from you in any
of the form.
reduction contributions to the SIMPLE
2 preceding years. However, you can
IRA plan rather than receiving these
Which Employers May
expand the group of employees who are
amounts as part of their regular
eligible to participate in the SIMPLE IRA
Establish and Maintain a
compensation. In addition, you will
plan by completing the options provided
contribute matching or nonelective
SIMPLE IRA Plan?
in Article I, items 1a and 1b. To choose
contributions on behalf of eligible
full eligibility, check the box in Article I,
To establish and maintain a SIMPLE IRA
employees (see Employee Eligibility
item 1a. Alternatively, to choose limited
plan, you must meet both of the
Requirements below and Contributions
eligibility, check the box in Article I, item
following requirements:
later). All contributions under this plan
1b, and then insert “$5,000” or a lower
will be deposited into a SIMPLE
1. Last calendar year, you had no
compensation amount (including zero)
individual retirement account or annuity
more than 100 employees (including
and “2” or a lower number of years of
established for each eligible employee
self-employed individuals) who earned
service in the blanks in (i) and (ii) of
with the financial institution selected by
$5,000 or more in compensation from
Article I, item 1b.
him or her.
you during the year. If you have a
In addition, you can exclude from
SIMPLE IRA plan but later exceed this
When To Use Form
participation those employees covered
100-employee limit, you will be treated
under a collective bargaining agreement
5304-SIMPLE
as meeting the limit for the 2 years
for which retirement benefits were the
following the calendar year in which you
A SIMPLE IRA plan may be established
subject of good faith bargaining. You
last satisfied the limit.
by using this Model Form or any other
may do this by checking the box in
2. You do not maintain during any part
document that satisfies the statutory
Article I, item 2. Under certain
of the calendar year another qualified
requirements.
circumstances, these employees must
plan with respect to which contributions
be excluded. See Which Employers May
Do not use Form 5304-SIMPLE if:
are made, or benefits are accrued, for
Establish and Maintain a SIMPLE IRA
1. You want to require that all SIMPLE
service in the calendar year. For this
Plan? above.
IRA plan contributions initially go to a
purpose, a qualified plan (defined in
financial institution designated by you.
Salary Reduction
section 219(g)(5)) includes a qualified
That is, you do not want to permit each
pension plan, a profit-sharing plan, a
Agreements (Article II)
of your eligible employees to choose a
stock bonus plan, a qualified annuity
financial institution that will initially
As indicated in Article II, item 1, a salary
plan, a tax-sheltered annuity plan, and a
receive contributions. Instead, use Form
reduction agreement permits an eligible
simplified employee pension (SEP) plan.
5305-SIMPLE, Savings Incentive Match
employee to make a salary reduction
A qualified plan that only covers
Plan for Employees of Small Employers
election to have his or her compensation
employees covered under a collective
(SIMPLE)—for Use With a Designated
for each pay period reduced by a
bargaining agreement for which
Financial Institution;
percentage (expressed as a percentage
retirement benefits were the subject of
or dollar amount). The total amount of
good faith bargaining is disregarded if
these employees are excluded from
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