Form 5305-Simple - Savings Incentive Match Plan For Employees Of Small Employers (Simple) - For Use With A Designated Financial Institution Page 4

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Form 5305-SIMPLE (Rev. 3-2012)

Page

General Instructions

these employees are excluded from

income from you that is income from

participating in the SIMPLE IRA plan.

sources within the United States to be

Section references are to the Internal

eligible under this plan; or

If the failure to continue to satisfy the

Revenue Code unless otherwise noted.

100-employee limit or the one-plan rule

3. You want to establish a SIMPLE

described in 1 or 2 above is due to an

401(k) plan.

Purpose of Form

acquisition or similar transaction

Completing Form

Form 5305-SIMPLE is a model Savings

involving your business, special rules

5305-SIMPLE

Incentive Match Plan for Employees of

apply. Consult your tax advisor to find

Small Employers (SIMPLE) plan

out if you can still maintain the plan after

Pages 1 and 2 of Form 5305-SIMPLE

document that an employer may use in

the transaction.

contain the operative provisions of your

combination with SIMPLE IRAs to

Certain related employers (trades or

SIMPLE IRA plan. This SIMPLE IRA plan

establish a SIMPLE IRA plan described

businesses under common control) must

is considered adopted when you have

in section 408(p).

be treated as a single employer for

completed all appropriate boxes and

These instructions are designed to

purposes of the SIMPLE requirements.

blanks and it has been executed by you

assist in the establishment and

These are:

and the designated financial institution.

administration of the SIMPLE IRA plan.

(1) a controlled group of corporations

The SIMPLE IRA plan is a legal

They are not intended to supersede any

under section 414(b);

document with important tax

provision in the SIMPLE IRA plan.

consequences for you and your

(2) a partnership or sole proprietorship

Do not file Form 5305-SIMPLE with

employees. You may want to consult

under common control under section

the IRS. Instead, keep it with your

with your attorney or tax advisor before

414(c); or

records.

adopting this plan.

(3) an affiliated service group under

For more information, see Pub. 560,

section 414(m). In addition, if you have

Employee Eligibility

Retirement Plans for Small Business

leased employees required to be treated

Requirements (Article I)

(SEP, SIMPLE, and Qualified Plans), and

as your own employees under the rules

Pub. 590, Individual Retirement

of section 414(n), then you must count

Each year for which this SIMPLE IRA plan

Arrangements (IRAs).

all such leased employees for the

is effective, you must permit salary

Note. If you used the March 2002, August

requirements listed above.

reduction contributions to be made by all

2005, or September 2008 version of Form

of your employees who are reasonably

What Is a SIMPLE IRA Plan?

5305-SIMPLE to establish a model

expected to receive at least $5,000 in

Savings Incentive Match Plan, you are not

compensation from you during the year,

A SIMPLE IRA plan is a written

required to use this version of the form.

and who received at least $5,000 in

arrangement that provides you and your

compensation from you in any 2

Instructions for the

employees with an easy way to make

preceding years. However, you can

contributions to provide retirement

Employer

expand the group of employees who are

income for your employees. Under a

eligible to participate in the SIMPLE IRA

SIMPLE IRA plan, employees may

Which Employers May

plan by completing the options provided

choose whether to make salary

in Article I, items 1a and 1b. To choose

reduction contributions to the SIMPLE

Establish and Maintain a

full eligibility, check the box in Article I,

IRA plan rather than receiving these

SIMPLE IRA Plan?

item 1a. Alternatively, to choose limited

amounts as part of their regular

eligibility, check the box in Article I, item

compensation. In addition, you will

To establish and maintain a SIMPLE IRA

1b, and then insert “$5,000” or a lower

contribute matching or nonelective

plan, you must meet both of the

compensation amount (including zero)

contributions on behalf of eligible

following requirements:

and “2” or a lower number of years of

employees (see Employee Eligibility

1. Last calendar year, you had no

service in the blanks in (i) and (ii) of Article

Requirements below and Contributions

more than 100 employees (including

I, item 1b.

later). All contributions under this plan

self-employed individuals) who earned

will be deposited into a SIMPLE

In addition, you can exclude from

$5,000 or more in compensation from

individual retirement account or annuity

participation those employees covered

you during the year. If you have a

established for each eligible employee

under a collective bargaining agreement

SIMPLE IRA plan but later exceed this

with the designated financial institution

for which retirement benefits were the

100-employee limit, you will be treated

named in Article VII.

subject of good faith bargaining. You

as meeting the limit for the 2 years

may do this by checking the box in

When To Use Form

following the calendar year in which you

Article I, item 2. Under certain

last satisfied the limit.

5305-SIMPLE

circumstances, these employees must

2. You do not maintain during any part

be excluded. See Which Employers May

A SIMPLE IRA plan may be established

of the calendar year another qualified

Establish and Maintain a SIMPLE IRA

by using this Model Form or any other

plan with respect to which contributions

Plan? earlier.

document that satisfies the statutory

are made, or benefits are accrued, for

requirements.

Salary Reduction

service in the calendar year. For this

purpose, a qualified plan (defined in

Agreements (Article II)

Do not use Form 5305-SIMPLE if:

section 219(g)(5)) includes a qualified

1. You want to permit each of your

As indicated in Article II, item 1, a salary

pension plan, a profit-sharing plan, a

eligible employees to choose a financial

reduction agreement permits an eligible

stock bonus plan, a qualified annuity

institution that will initially receive

employee to make an election to have

plan, a tax-sheltered annuity plan, and a

contributions. Instead, use Form

his or her compensation for each pay

simplified employee pension (SEP) plan.

5304-SIMPLE, Savings Incentive Match

period reduced by a percentage

A qualified plan that only covers

Plan for Employees of Small Employers

(expressed as a percentage or dollar

employees covered under a collective

(SIMPLE)—Not for Use With a

amount). The total amount of the

bargaining agreement for which

Designated Financial Institution;

reduction in the employee’s

retirement benefits were the subject of

compensation cannot exceed the

2. You want employees who are

good faith bargaining is disregarded if

nonresident aliens receiving no earned

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