Form 5305-Simple - Savings Incentive Match Plan For Employees Of Small Employers (Simple) - For Use With A Designated Financial Institution Page 6

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Form 5305-SIMPLE (Rev. 3-2012)
Employee Notification
Contributions will be treated as made
procedures for withdrawals and transfers
for a particular tax year if they are made
from the SIMPLE IRAs established under
You must notify eligible employees prior
for that year and are made by the due
this SIMPLE IRA plan. The summary
to the employees’ 60-day election period
date (including extensions) of your
description must be received by the
described previously that they can make
income tax return for that year.
employer in sufficient time to comply
or change salary reduction elections. In
with the Employee Notification
Choosing the Designated
this notification, you must indicate
requirements on this page.
whether you will provide:
Financial Institution
If you fail to provide the summary
1. A matching contribution equal to
description described above, you will be
As indicated in Article V, item 4, a
your employees’ salary reduction
liable for a penalty of $50 per day until
designated financial institution is a
contributions up to a limit of 3% of their
the notification is provided. If you can
trustee, custodian, or insurance
show that the failure was due to
company (that issues annuity contracts)
reasonable cause, the penalty will not be
2. A matching contribution equal to
for the SIMPLE IRA plan that would
your employees’ salary reduction
receive all contributions made pursuant
contributions subject to a percentage
to the SIMPLE IRA plan and deposit the
limit that is between 1 and 3% of their
Paperwork Reduction Act Notice. You
contributions to the SIMPLE IRA of each
compensation; or
are not required to provide the
eligible employee.
information requested on a form that is
3. A nonelective contribution equal to
Only certain financial institutions, such
subject to the Paperwork Reduction Act
2% of your employees’ compensation.
as banks, savings and loan associations,
unless the form displays a valid OMB
insured credit unions, insurance
You can use the Model Notification to
control number. Books or records
companies (that issue annuity contracts),
Eligible Employees to satisfy these
relating to a form or its instructions must
or IRS-approved nonbank trustees may
employee notification requirements for
be retained as long as their contents
serve as a designated financial institution
this SIMPLE IRA plan. A Summary
may become material in the
under a SIMPLE IRA plan.
Description must also be provided to
administration of any Internal Revenue
eligible employees at this time. This
You are not required to choose a
law. Generally, tax returns and return
summary description requirement may
designated financial institution for your
information are confidential, as required
be satisfied by providing a completed
SIMPLE IRA plan. However, if you do not
by section 6103.
copy of pages 1 and 2 of Form
want to choose a designated financial
The time needed to complete this
5305-SIMPLE (including the Article VI
institution, you cannot use this form (see
form will vary depending on individual
Procedures for Withdrawals and
When To Use Form 5305-SIMPLE
circumstances. The estimated average
Transfers from the SIMPLE IRAs
time is:
established under this SIMPLE IRA plan).
Instructions for the
Recordkeeping .
. 3 hr., 38 min.
If you fail to provide the employee
Designated Financial
notification (including the summary
Learning about the
description) described above, you will be
law or the form .
. 2 hr., 26 min.
liable for a penalty of $50 per day until
Preparing the form
. 47 min.
the notification is provided. If you can
Completing Form
If you have comments concerning the
show that the failure was due to
accuracy of these time estimates or
reasonable cause, the penalty will not be
suggestions for making this form
By completing Article VII, you have
simpler, we would be happy to hear
Reporting Requirements
agreed to be the designated financial
from you. You can write to the Internal
institution for this SIMPLE IRA plan. You
Revenue Service, Tax Products
You are not required to file any annual
agree to maintain IRAs on behalf of all
Coordinating Committee,
information returns for your SIMPLE IRA
individuals receiving contributions under
SE:W:CAR:MP:T:M:S, 1111 Constitution
plan, such as Form 5500, Annual
the plan and to receive all contributions
Ave. NW, IR-6526, Washington, DC
Return/Report of Employee Benefit Plan
made pursuant to this plan and to
20224. Do not send this form to this
or Form 5500-EZ, Annual Return of
deposit those contributions to the
address. Instead, keep it for your
One-Participant (Owners and Their
SIMPLE IRAs of each eligible employee
Spouses) Retirement Plan. However, you
as soon as practicable. You also agree
must report to the IRS which eligible
that upon the request of a participant,
employees are active participants in the
you will transfer the participant’s balance
SIMPLE IRA plan and the amount of
in a SIMPLE IRA to another IRA without
your employees’ salary reduction
cost or penalty to the participant.
contributions to the SIMPLE IRA plan on
Summary Description
Form W-2. These contributions are
subject to social security, Medicare,
Each year the SIMPLE IRA plan is in
railroad retirement, and federal
effect, you must provide the employer
unemployment tax.
the information described in section
Deducting Contributions
408(l)(2)(B). This requirement may be
satisfied by providing the employer a
Contributions to this SIMPLE IRA plan
current copy of Form 5305-SIMPLE
are deductible in your tax year
(including instructions) together with your
containing the end of the calendar year
for which the contributions are made.


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