SIMPLE IRA A low-complexity plan for small businesses with up to 100 employees

• What are the eligibility requirements for opening a SIMPLE IRA plan? Which employers can establish a SIMPLE IRA plan?

  Generally, SIMPLE IRA plans can be established by any business with 100 or fewer employees who earned $5,000 or more in the preceding year, and which does not currently maintain any other retirement plan.

• What mutual funds are eligible for investment in a SIMPLE IRA?

  You may buy or exchange any mutual funds available to IRAs at Fidelity in your SIMPLE IRA, as long as the minimum initial and subsequent investment limits are met. To be eligible for ongoing SIMPLE IRA contributions, however, a mutual fund must waive all loads, fees and investment minimums for SIMPLE IRA customers.

• How do I get a copy of my Adoption Agreement, Summary Description, or a Plan Level Report?

  For copies of your Plan Adoption Agreement or additional Summary Descriptions, please call a retirement representative at 800-544-5373 and say "Small business retirement plans" when prompted. The Summary Description is mailed to plans annually in September. Plan Level Reports are sent on a monthly basis to every SIMPLE IRA plan. The report includes a total of all salary deferral and employer contributions made for the period, is broken out by participants, and includes a participant level breakout of contributions.

• When must my employees be notified of their eligibility to participate in the plan?

  Eligibility varies based on the election you chose when you adopted the plan. Employees should be notified no later than as soon as they become eligible. In addition, you are required to provide eligible employees a Summary Description and Participant Notice on an annual basis (by November 2nd). 1. The Fidelity SIMPLE IRA authorized individual receives a Summary Description and Participant Notice when the plan is established and annually thereafter in September.

  To open a SIMPLE IRA plan for the current year, the plan must be established and employees notified by October 1; please note that an exception applies for businesses established after October 1. See the Maintain your plan section for more information.

• How is the salary deferral process managed and who gets the paperwork?

  Your employees complete the Salary Reduction Agreement Form and return it to you or your payroll office (it does not go to Fidelity). A sample salary reduction agreement form is available online and is included in the Fidelity SIMPLE IRA employee enrollment kit. You may use this form or create your own customized version.

Employer responsibilities

• Establish your plan

  a. Establish your plan and notify eligible employees by October 1 of the year you intend to begin your plan.
  See: Open Your Plan

  b. Complete the company profile form to provide us with information about your company.

  • Choose the authorized individual(s) on the company profile form. It's a good idea to name the business owner as the primary authorized individual for the plan. because that's the person who will have the ability to add and remove authorized individuals.
  • Set up your company bank for Plan ManagerLog In Required. Even if you don't intend to use Plan ManagerLog In Required, it's a good idea to set up a company bank link in the event there's an issue with your outside funding mechanism.

  c. Familiarize yourself with Changes To Your SIMPLE IRA Plan due to SECURE 2.0.

• Notify eligible employees
  • Provide the Summary Description, Participant Notice, Salary Reduction Agreement and, for new participants, a SIMPLE Application (available online) to eligible employees. See: Enroll Employees
  • Provide the notification for the first plan year and for every subsequent plan year. Employees must be given 60 days to make their elections.
    • The annual 60-day election period allows employees to enter into or modify their salary reduction agreements. The election period starts when the employer satisfies the plan notification requirements.
    • For the first plan year, the election period can be any 60-day period which includes the plan effective date.
    • The election must start by the plan effective date.
    • Employers may notify employees earlier, but the election period cannot end before the effective date.
    • For subsequent plan years, the election period is the 60-day period immediately preceding January 1 of the calendar plan year. Employers must provide the notification by November 2 prior to the plan year.
• Keep records

  It's important to keep your original adoption agreement and any subsequent adoption agreements you fill out for the life of your plan, and possibly for years after termination. You should retain the Salary Reduction Agreements your employees return to you, and records of any contributions made to the plan on their behalf, as well as other documents related to your plan.

• Contribute to participant accounts
  • There are two options to fund the accounts in your SIMPLE IRA Plan: Plan Manger or by using an external bank or payroll vendor. See: Funding Your Plan
  • Company contributions can be made up to your business tax filing dead line, plus extensions. Salary deferral contributions need to be made as soon as possible, but no later than 30 days after the end of the month in which they were deferred. See the IRS rules for more information.
• Notify employees eligible to participate annually
  • You must decide before November 2 of the current year whether or not you wish to continue the plan for the upcoming year, and if you want to make changes to what you offer.
  • Be aware that if your plan provides a matching contribution, you must match dollar for dollar up to 3% of compensation for at least three years out of a five year period.
  • By November 2 you need to notify your employees if there will or will not be a plan for the upcoming year. If the plan is continuing the employees must also be informed of what the terms are by distributing a new Summary Description and Participant notice. These must be completed and distributed by November 2 to give your employees 60 days for their elections before January 1.
• Abide by the terms defined in the plan agreement
  • Fidelity SIMPLE IRA Plan Agreement
• Correct errors of operation
  • Despite your best efforts, there may be errors of operation that arise in running your plan. Most errors occur around contributions. A good practice is to double check the following before submitting a contribution: Is it going to the right person? Is it marked for the correct year? Is it the right type of contribution (company vs. salary deferral)? Did you already process this contribution, and would this result in a duplicate? Some minor errors may be fixable within the plan. Please call a Retirement Representative to see if we can help 1-800-544-5373 (say "Small Business Retirement Plan" when prompted.) In some cases, the error may result in an excess contribution.
  • Excess contributions: There is no formal IRS method to correct SIMPLE IRA excesses. You should consult your tax advisor for guidance if you determine you have an excess that must be removed, prior to completing the SIMPLE IRA RETURN OF EXCESS FORM (PDF). Additional information may also be found in the IRS SIMPLE IRA FIX-IT GUIDE.

  NOTE: Fidelity cannot withdraw funds from a client's account without their permission. Both the plan's Authorized Individual and the account owner must sign off on a request for a return of excess.

• Terminate your plan when appropriate
  • If you are discontinuing your SIMPLE IRA Plan. you should notify your employees prior to November 2 of the current year that there will not be a plan effective the following January 1.
  • Notify by calling one of our Retirement representatives at 800-544-5373. Please make sure all contributions have been made before notifying Fidelity of the termination. Access to make contributions will not be available once the plan is terminated.
  • In the future, should you want to restart your plan you must notify eligible employees by November 2 of the year prior to the start of your plan on the following January 1. You cannot start a plan mid-year after your initial year.

Fidelity's responsibilities

• Provide and maintain the Plan Agreement PDF

  Provide and maintain the Plan Agreement (PDF)

  NOTE: Fidelity does not use the IRS Model documents 5304 or 5305 - SIMPLE

• Maintain accounts

  Fidelity will provide individual brokerage SIMPLE IRA accounts on our platform for each eligible employee and the Fidelity SIMPLE IRA Customer Agreement and Important Disclosures (PDF) that outlines the rules and agreement for the account, and will be provided to your employee upon account opening.

• Prepare tax forms for employees
  • IRS tax form 5498 each year there is activity in the account (including contributions).
  • IRS tax form 1099-R for each year distributions or rollovers are processed out of an account.
• Offer planning and investment guidance to your eligible employees who set up their SIMPLE IRAs at Fidelity
  1. They can choose investments using our exceptional online tools and data as well as through our experienced Representatives.
  2. For more information on how we can help you with investment management, planning and advice, please see What We Offer.
• Statements

  Provide monthly plan statements for months that there are any contributions to the plan.

Frequently asked questions

• My business is growing. Am I still eligible for a SIMPLE IRA plan?

  Generally speaking, you are eligible for a SIMPLE IRA as long as your business has fewer than 100 employees earning $5,000 or more in the preceding year. As you grow, other retirement plans may become more appropriate. Please contact a Fidelity retirement representative at 800-544-5373 and say "Small business retirement plans" when prompted for more information.