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Form 5305-SIMPLE Lowell Massachusetts: What You Should Know

However, you need to know the following to make it the best option for your small business: 1. An employee will need to participate in a SIMPLE IRA plan even if the company is using an employer-sponsored 401(k) plan. 2. If an employee participates in a SIMPLE IRA plan but uses your plan to meet their retirement savings obligations instead of investing a portion on their own, the SIMPLE IRA plan will fail if the employee makes a withdrawal from the plan. 3. To make sure your SIMPLE IRA plan meets the IRS requirements, make sure all the following items are correct: 4. Employees can opt to be reimbursed for their participation by the employer. This is known as self-reimbursement. 5. Employees can continue participating in the SIMPLE IRA plan if they change employers or if there is a change in employer. Your client must continue to do payroll reporting on the employee's participation in the SIMPLE IRA plan. 6. IRA distributions that are made from the IRA for health care purposes or to cover other qualified expenses must be funded through the plan. The employees cannot choose to fund the distribution through their own IRA account. The distribution must be made no later than the day before the year in which the contribution is to be made. 7. You cannot use the SIMPLE IRA plan for retirement saving in the following situations: 1. An employee's participation in the SIMPLE IRA plan is terminated. 2. An employee is involuntarily terminated (such as for a company downsizing) 3. An employer makes a transfer of an employee's IRA (i.e. makes an IRA contribution or a withdrawal, even if the employee makes a contribution or withdrawal that is not included in the employee's gross income). SIMPLE IRA Overview Employee Participation SIMPLE IRA agreements must be signed by the person who is responsible for managing the SIMPLE IRA plan on behalf of the employer. Employees who participate in the SIMPLE IRA plan will: a. Sign the agreement by using a pen and paper. b. Sign it on the company letterhead in accordance with the plan's instructions. c. Receive no compensation from the plan for signing it. d. Have no income, Social Security, Medicare, and/or Social Insurance benefits from the plan. Qualified Retirement Plan. Because SIMPLE IRA plans rely on qualified retirement plan guidelines, participants will have access to certain tax-deferred savings accounts.

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