Form 5305-SIMPLE

(Rev. March 2012) 

Department of the Treasury 

Internal Revenue Service 

Savings Incentive Match Plan for 

Employees of Small Employers (SIMPLE)— 

for Use With a Designated Financial Institution 

OMB No. 1545-1502 

Do not file 

with the Internal 

Revenue Service 

Name of Employer 

establishes the following SIMPLE 

IRA plan under section 408(p) of the Internal Revenue Code and pursuant to the instructions contained in this form. 

Article I—Employee Eligibility Requirements (complete applicable box(es) and blanks—see instructions) 

1 General Eligibility Requirements. The Employer agrees to permit salary reduction contributions to be made in each calendar year to the 

SIMPLE individual retirement account or annuity established at the designated financial institution (SIMPLE IRA) for each employee who meets 

the following requirements (select either 1a or 1b): 

a Full Eligibility. All employees are eligible. 

b Limited Eligibility. Eligibility is limited to employees who are described in both (i) and (ii) below: 

(i) Current compensation. Employees who are reasonably expected to receive at least in compensation (not to 

exceed $5,000) for calendar year. 

$

(ii) Prior compensation. Employees who have received at least in compensation (not to exceed $5,000) during any 

 calendar year(s) (insert 0, 1, or 2) preceding the calendar year. 

$

2 Excludable Employees 

The Employer elects to exclude employees covered under a collective bargaining agreement for which retirement benefits were the subject 

of good faith bargaining. Note: This box is deemed checked if the Employer maintains a qualified plan covering only such employees. 

Article II—Salary Reduction Agreements (complete the box and blank, if applicable—see instructions) 

1 Salary Reduction Election. An eligible employee may make an election to have his or her compensation for each pay period reduced. The total 

amount of the reduction in the employee’s compensation for a calendar year cannot exceed the applicable amount for that year. See instructions. 

2 Timing of Salary Reduction Elections 

a For a calendar year, an eligible employee may make or modify a salary reduction election during the 60-day period immediately preceding 

January 1 of that year. However, for the year in which the employee becomes eligible to make salary reduction contributions, the period 

during which the employee may make or modify the election is a 60-day period that includes either the date the employee becomes eligible 

or the day before. 

b In addition to the election periods in 2a, eligible employees may make salary reduction elections or modify prior elections 

 . If the Employer chooses 

this option, insert a period or periods (e.g., semi-annually, quarterly, monthly, or daily) that will apply uniformly to all eligible employees. 

c No salary reduction election may apply to compensation that an employee received, or had a right to immediately receive, before 

execution of the salary reduction election. 

d An employee may terminate a salary reduction election at any time during the calendar year. If this box is checked, an employee who 

terminates a salary reduction election not in accordance with 2b may not resume salary reduction contributions during the calendar year. 

Article III—Contributions (complete the blank, if applicable—see instructions) 

1 Salary Reduction Contributions. The amount by which the employee agrees to reduce his or her compensation will be contributed by the 

Employer to the employee’s SIMPLE IRA. 

2 a Matching Contributions 

(i) For each calendar year, the Employer will contribute a matching contribution to each eligible employee’s SIMPLE IRA equal to the 

employee’s salary reduction contributions up to a limit of 3% of the employee’s compensation for the calendar year. 

(ii) The Employer may reduce the 3% limit for the calendar year in (i) only if: 

(1) The limit is not reduced below 1%; (2) The limit is not reduced for more than 2 calendar years during the 5-year period ending with 

the calendar year the reduction is effective; and (3) Each employee is notified of the reduced limit within a reasonable period of 

time before the employees’ 60-day election period for the calendar year (described in Article II, item 2a). 

b Nonelective Contributions 

(i) For any calendar year, instead of making matching contributions, the Employer may make nonelective contributions equal to 2% of 

compensation for the calendar year to the SIMPLE IRA of each eligible employee who has at least (not more than 

$5,000) in compensation for the calendar year. No more than $250,000* in compensation can be taken into account in determining the 

nonelective contribution for each eligible employee. 

 $

(ii) For any calendar year, the Employer may make 2% nonelective contributions instead of matching contributions only if: 

(1) Each eligible employee is notified that a 2% nonelective contribution will be made instead of a matching contribution; and 

(2) This notification is provided within a reasonable period of time before the employees’ 60-day election period for the calendar year 

(described in Article II, item 2a). 

3 Time and Manner of Contributions 

a The Employer will make the salary reduction contributions (described in 1 above) to the designated financial institution for the IRAs established under 

this SIMPLE IRA plan no later than 30 days after the end of the month in which the money is withheld from the employee’s pay. See instructions. 

b The Employer will make the matching or nonelective contributions (described in 2a and 2b above) to the designated financial institution for 

the IRAs established under this SIMPLE IRA plan no later than the due date for filing the Employer’s tax return, including extensions, for 

the taxable year that includes the last day of the calendar year for which the contributions are made. * This is the amount for 2012. For later years, the limit may be increased for cost-of-living adjustments. The IRS announces the increase, if any, in a news release, in 

the Internal Revenue Bulletin, and on the IRS’s internet website at IRS.gov. 

For Paperwork Reduction Act Notice, see instructions. Cat. No. 23063F Form 5305-SIMPLE (Rev. 3-2012) 
Form 5305-SIMPLE (Rev. 3-2012) Page 2 

Article IV—Other Requirements and Provisions 

1 Contributions in General. The Employer will make no contributions to the SIMPLE IRAs other than salary reduction contributions 

(described in Article III, item 1) and matching or nonelective contributions (described in Article III, items 2a and 2b). 

2 Vesting Requirements. All contributions made under this SIMPLE IRA plan are fully vested and nonforfeitable. 

3 No Withdrawal Restrictions. The Employer may not require the employee to retain any portion of the contributions in his or her SIMPLE 

IRA or otherwise impose any withdrawal restrictions. 

4 No Cost Or Penalty For Transfers. The Employer will not impose any cost or penalty on a participant for the transfer of the participant’s 

SIMPLE IRA balance to another IRA. 

5 Amendments To This SIMPLE IRA Plan. This SIMPLE IRA plan may not be amended except to modify the entries inserted in the blanks 

or boxes provided in Articles I, II, III, VI, and VII. 

6 Effects Of Withdrawals and Rollovers 

a An amount withdrawn from the SIMPLE IRA is generally includible in gross income. However, a SIMPLE IRA balance may be rolled over or 

transferred on a tax-free basis to another IRA designed solely to hold funds under a SIMPLE IRA plan. In addition, an individual may roll 

over or transfer his or her SIMPLE IRA balance to any IRA or eligible retirement plan after a 2-year period has expired since the individual 

first participated in any SIMPLE IRA plan of the Employer. Any rollover or transfer must comply with the requirements of section 408. 

b If an individual withdraws an amount from a SIMPLE IRA during the 2-year period beginning when the individual first participated in any 

SIMPLE IRA plan of the Employer and the amount is subject to the additional tax on early distributions under section 72(t), this additional tax 

is increased from 10% to 25%. 

Article V—Definitions 

1 Compensation 

a General Definition of Compensation. Compensation means the sum of wages, tips, and other compensation from the Employer subject 

to federal income tax withholding (as described in section 6051(a)(3)), the amounts paid for domestic service in a private home, local 

college club, or local chapter of a college fraternity or sorority, and the employee’s salary reduction contributions made under this plan, 

and, if applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity contract and compensation 

deferred under a section 457 plan required to be reported by the Employer on Form W-2 (as described in section 6051(a)(8)). 

b Compensation for Self-Employed Individuals. For self-employed individuals, compensation means the net earnings from self-employment 

determined under section 1402(a), without regard to section 1402(c)(6), prior to subtracting any contributions made pursuant to this plan on 

behalf of the individual. 

2 Employee. Employee means a common-law employee of the Employer. The term employee also includes a self-employed individual and a 

leased employee described in section 414(n) but does not include a nonresident alien who received no earned income from the Employer that 

constitutes income from sources within the United States. 

3 Eligible Employee. An eligible employee means an employee who satisfies the conditions in Article I, item 1 and is not excluded under 

Article I, item 2. 

4 Designated Financial Institution. A designated financial institution is a trustee, custodian, or insurance company (that issues annuity 

contracts) for the SIMPLE IRA plan that receives all contributions made pursuant to the SIMPLE IRA plan and deposits those contributions to 

the SIMPLE IRA of each eligible employee. 

Article VI—Procedures for Withdrawals and Transfers (The designated financial institution will provide the instructions 

(to be attached or inserted in the space below) on the procedures for withdrawals of contributions by employees.) 

Article VII—Effective Date 

This SIMPLE IRA plan is effective . See instructions. 

* * * * * 

Name of Employer 

Address of Employer 

By: Signature Date 

Name and title 

The undersigned agrees to serve as designated financial institution, receiving all contributions made pursuant to this SIMPLE IRA plan and 

depositing those contributions to the SIMPLE IRA of each eligible employee as soon as practicable. Upon the request of any participant, the 

undersigned also agrees to transfer the participant’s balance in a SIMPLE IRA established under this SIMPLE IRA plan to another IRA without 

cost or penalty to the participant. 

Name of designated financial institution 

Address 

By: Signature Date 

Name and title 

Form 5305-SIMPLE (Rev. 3-2012) 
Form 5305-SIMPLE (Rev. 3-2012) Page 3 

Model Notification to Eligible Employees 

I. Opportunity to Participate in the SIMPLE IRA Plan 

You are eligible to make salary reduction contributions to the SIMPLE 

IRA plan. This notice and the attached summary description provide you with information that you should consider before you 

decide whether to start, continue, or change your salary reduction agreement. 

II. Employer Contribution Election 

For the calendar year, the Employer elects to contribute to your SIMPLE IRA (employer must select either (1), (2), or (3)): 

(1) A matching contribution equal to your salary reduction contributions up to a limit of 3% of your compensation for the 

year; 

(2) A matching contribution equal to your salary reduction contributions up to a limit of (employer must insert a 

number from 1 to 3 and is subject to certain restrictions) of your compensation for the year; or 

%

(3) A nonelective contribution equal to 2% of your compensation for the year (limited to compensation of $250,000*) if you 

are an employee who makes at least (employer must insert an amount that is $5,000 or less) in 

compensation for the year. 

$ 

III. Administrative Procedures 

To start or change your salary reduction contributions, you must complete the salary reduction agreement and return it to 

 (employer should designate a place or 

individual) by (employer should insert a date that is not less than 60 days after notice is given). 

Model Salary Reduction Agreement 

I. Salary Reduction Election 

Subject to the requirements of the SIMPLE IRA plan of (name of 

employer) I authorize or (which equals of my current rate of pay) to be withheld from 

my pay for each pay period and contributed to my SIMPLE IRA as a salary reduction contribution. 

% $ % 

II. Maximum Salary Reduction 

I understand that the total amount of my salary reduction contributions in any calendar year cannot exceed the applicable 

amount for that year. See instructions. 

III. Date Salary Reduction Begins 

I understand that my salary reduction contributions will start as soon as permitted under the SIMPLE IRA plan and as soon as 

administratively feasible or, if later, (Fill in the date you want the salary reduction contributions to 

begin. The date must be after you sign this agreement.) 

. 

IV. Duration of Election 

This salary reduction agreement replaces any earlier agreement and will remain in effect as long as I remain an eligible employee 

under the SIMPLE IRA plan or until I provide my Employer with a request to end my salary reduction contributions or provide a 

new salary reduction agreement as permitted under this SIMPLE IRA plan. 

Signature of employee Date 

* This is the amount for 2012. For later years, the limit may be increased for cost-of-living adjustments. The IRS announces the increase, if any, in a news release, in 

the Internal Revenue Bulletin, and on the IRS website at IRS.gov. 

Form 5305-SIMPLE (Rev. 3-2012) 
Form 5305-SIMPLE (Rev. 3-2012) Page 4 

General Instructions 

Section references are to the Internal 

Revenue Code unless otherwise noted. 

Purpose of Form 

Form 5305-SIMPLE is a model Savings 

Incentive Match Plan for Employees of 

Small Employers (SIMPLE) plan 

document that an employer may use in 

combination with SIMPLE IRAs to 

establish a SIMPLE IRA plan described 

in section 408(p). 

These instructions are designed to 

assist in the establishment and 

administration of the SIMPLE IRA plan. 

They are not intended to supersede any 

provision in the SIMPLE IRA plan. 

Do not file Form 5305-SIMPLE with 

the IRS. Instead, keep it with your 

records. 

For more information, see Pub. 560, 

Retirement Plans for Small Business 

(SEP, SIMPLE, and Qualified Plans), and 

Pub. 590, Individual Retirement 

Arrangements (IRAs). 

Note. If you used the March 2002, August 

2005, or September 2008 version of Form 

5305-SIMPLE to establish a model 

Savings Incentive Match Plan, you are not 

required to use this version of the form. 

Instructions for the 

Employer 

Which Employers May 

Establish and Maintain a 

SIMPLE IRA Plan? 

To establish and maintain a SIMPLE IRA 

plan, you must meet both of the 

following requirements: 

1. Last calendar year, you had no 

more than 100 employees (including 

self-employed individuals) who earned 

$5,000 or more in compensation from 

you during the year. If you have a 

SIMPLE IRA plan but later exceed this 

100-employee limit, you will be treated 

as meeting the limit for the 2 years 

following the calendar year in which you 

last satisfied the limit. 

2. You do not maintain during any part 

of the calendar year another qualified 

plan with respect to which contributions 

are made, or benefits are accrued, for 

service in the calendar year. For this 

purpose, a qualified plan (defined in 

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

pension plan, a profit-sharing plan, a 

stock bonus plan, a qualified annuity 

plan, a tax-sheltered annuity plan, and a 

simplified employee pension (SEP) plan. 

A qualified plan that only covers 

employees covered under a collective 

bargaining agreement for which 

retirement benefits were the subject of 

good faith bargaining is disregarded if 

these employees are excluded from 

participating in the SIMPLE IRA plan. 

If the failure to continue to satisfy the 

100-employee limit or the one-plan rule 

described in 1 or 2 above is due to an 

acquisition or similar transaction 

involving your business, special rules 

apply. Consult your tax advisor to find 

out if you can still maintain the plan after 

the transaction. 

Certain related employers (trades or 

businesses under common control) must 

be treated as a single employer for 

purposes of the SIMPLE requirements. 

These are: 

(1) a controlled group of corporations 

under section 414(b); 

(2) a partnership or sole proprietorship 

under common control under section 

414(c); or 

(3) an affiliated service group under 

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

leased employees required to be treated 

as your own employees under the rules 

of section 414(n), then you must count 

all such leased employees for the 

requirements listed above. 

What Is a SIMPLE IRA Plan? 

A SIMPLE IRA plan is a written 

arrangement that provides you and your 

employees with an easy way to make 

contributions to provide retirement 

income for your employees. Under a 

SIMPLE IRA plan, employees may 

choose whether to make salary 

reduction contributions to the SIMPLE 

IRA plan rather than receiving these 

amounts as part of their regular 

compensation. In addition, you will 

contribute matching or nonelective 

contributions on behalf of eligible 

employees (see Employee Eligibility 

Requirements below and Contributions 

later). All contributions under this plan 

will be deposited into a SIMPLE 

individual retirement account or annuity 

established for each eligible employee 

with the designated financial institution 

named in Article VII. 

When To Use Form 

5305-SIMPLE 

A SIMPLE IRA plan may be established 

by using this Model Form or any other 

document that satisfies the statutory 

requirements. 

Do not use Form 5305-SIMPLE if: 

1. You want to permit each of your 

eligible employees to choose a financial 

institution that will initially receive 

contributions. Instead, use Form 

5304-SIMPLE, Savings Incentive Match 

Plan for Employees of Small Employers 

(SIMPLE)—Not for Use With a 

Designated Financial Institution; 

2. You want employees who are 

nonresident aliens receiving no earned 

income from you that is income from 

sources within the United States to be 

eligible under this plan; or 

3. You want to establish a SIMPLE 

401(k) plan. 

Completing Form 

5305-SIMPLE 

Pages 1 and 2 of Form 5305-SIMPLE 

contain the operative provisions of your 

SIMPLE IRA plan. This SIMPLE IRA plan 

is considered adopted when you have 

completed all appropriate boxes and 

blanks and it has been executed by you 

and the designated financial institution. 

The SIMPLE IRA plan is a legal 

document with important tax 

consequences for you and your 

employees. You may want to consult 

with your attorney or tax advisor before 

adopting this plan. 

Employee Eligibility 

Requirements (Article I) 

Each year for which this SIMPLE IRA plan 

is effective, you must permit salary 

reduction contributions to be made by all 

of your employees who are reasonably 

expected to receive at least $5,000 in 

compensation from you during the year, 

and who received at least $5,000 in 

compensation from you in any 2 

preceding years. However, you can 

expand the group of employees who are 

eligible to participate in the SIMPLE IRA 

plan by completing the options provided 

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

full eligibility, check the box in Article I, 

item 1a. Alternatively, to choose limited 

eligibility, check the box in Article I, item 

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

compensation amount (including zero) 

and “2” or a lower number of years of 

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

I, item 1b. 

In addition, you can exclude from 

participation those employees covered 

under a collective bargaining agreement 

for which retirement benefits were the 

subject of good faith bargaining. You 

may do this by checking the box in 

Article I, item 2. Under certain 

circumstances, these employees must 

be excluded. See Which Employers May 

Establish and Maintain a SIMPLE IRA 

Plan? earlier. 

Salary Reduction 

Agreements (Article II) 

As indicated in Article II, item 1, a salary 

reduction agreement permits an eligible 

employee to make an election to have 

his or her compensation for each pay 

period reduced by a percentage 

(expressed as a percentage or dollar 

amount). The total amount of the 

reduction in the employee’s 

compensation cannot exceed the 
Form 5305-SIMPLE (Rev. 3-2012) Page 5 

applicable amount for any calendar year. 

The applicable amount is $11,500 for 

2012. After 2012, the $11,500 amount 

may be increased for cost-of-living 

adjustments. In the case of an eligible 

employee who is 50 or older by the end 

of the calendar year, the above limitation 

is increased by $2,500 for 2012. After 

2012, the $2,500 amount may be 

increased for cost-of-living adjustments. 

Timing of Salary Reduction 

Elections 

For a calendar year, an eligible employee 

may make or modify a salary reduction 

election during the 60-day period 

immediately preceding January 1 of that 

year. However, for the year in which the 

employee becomes eligible to make 

salary reduction contributions, the period 

during which the employee may make or 

modify the election is a 60-day period 

that includes either the date the 

employee becomes eligible or the day 

before. 

You can extend the 60-day election 

periods to provide additional 

opportunities for eligible employees to 

make or modify salary reduction 

elections using the blank in Article II, 

item 2b. For example, you can provide 

that eligible employees may make new 

salary reduction elections or modify prior 

elections for any calendar quarter during 

the 30 days before that quarter. 

You may use the Model Salary 

Reduction Agreement on page 3 to 

enable eligible employees to make or 

modify salary reduction elections. 

Employees must be permitted to 

terminate their salary reduction elections 

at any time. They may resume salary 

reduction contributions for the year if 

permitted under Article II, item 2b. 

However, by checking the box in Article 

II, item 2d, you may prohibit an 

employee who terminates a salary 

reduction election outside the normal 

election cycle from resuming salary 

reduction contributions during the 

remainder of the calendar year. 

Contributions (Article III) 

Only contributions described below may 

be made to this SIMPLE IRA plan. No 

additional contributions may be made. 

Salary Reduction Contributions 

As indicated in Article III, item 1, salary 

reduction contributions consist of the 

amount by which the employee agrees 

to reduce his or her compensation. You 

must contribute the salary reduction 

contributions to the designated financial 

institution for the employee’s SIMPLE 

IRA. 

Matching Contributions 

In general, you must contribute a 

matching contribution to each eligible 

employee’s SIMPLE IRA equal to the 

employee’s salary reduction 

contributions. This matching contribution 

cannot exceed 3% of the employee’s 

compensation. See Definition of 

Compensation later. 

You may reduce this 3% limit to a 

lower percentage, but not lower than 

1%. You cannot lower the 3% limit for 

more than 2 calendar years out of the 

5-year period ending with the calendar 

year the reduction is effective. 

Note. If any year in the 5-year period 

described above is a year before you 

first established any SIMPLE IRA plan, 

you will be treated as making a 3% 

matching contribution for that year for 

purposes of determining when you may 

reduce the employer matching 

contribution. 

To elect this option, you must notify 

the employees of the reduced limit within 

a reasonable period of time before the 

applicable 60-day election periods for 

the year. See Timing of Salary Reduction 

Elections earlier. 

Nonelective Contributions 

Instead of making a matching 

contribution, you may, for any year, 

make a nonelective contribution equal to 

2% of compensation for each eligible 

employee who has at least $5,000 in 

compensation for the year. Nonelective 

contributions may not be based on more 

than $250,000* of compensation. 

To elect to make nonelective 

contributions, you must notify employees 

within a reasonable period of time before 

the applicable 60-day election periods 

for such year. See Timing of Salary 

Reduction Elections earlier. 

Note. Insert “$5,000” in Article III, item 

2b(i) to impose the $5,000 compensation 

requirement. You may expand the group 

of employees who are eligible for 

nonelective contributions by inserting a 

compensation amount lower than 

$5,000. 

Effective Date (Article VII) 

Insert in Article VII the date you want the 

provisions of the SIMPLE IRA plan to 

become effective. You must insert 

January 1 of the applicable year unless 

this is the first year for which you are 

adopting any SIMPLE IRA plan. If this is 

the first year for which you are adopting 

a SIMPLE IRA plan, you may insert any 

date between January 1 and October 1, 

inclusive of the applicable year. 

Additional Information 

Timing of Salary Reduction 

Contributions 

The employer must make the salary 

reduction contributions to the 

designated financial institution for the 

SIMPLE IRAs of all eligible employees 

no later than the 30th day of the month 

following the month in which the 

amounts would otherwise have been 

payable to the employee in cash. 

The Department of Labor has 

indicated that most SIMPLE IRA plans 

are also subject to Title I of the 

Employee Retirement Income Security 

Act of 1974 (ERISA). Under Department 

of Labor regulations, at 29 CFR 

2510.3-102, salary reduction 

contributions must be made to the 

SIMPLE IRA at the designated financial 

institution as of the earliest date on 

which those contributions can 

reasonably be segregated from the 

employer’s general assets, but in no 

event later than the 30-day deadline 

described previously. 

Definition of Compensation 

“Compensation” means the amount 

described in section 6051(a)(3) (wages, 

tips, and other compensation from the 

employer subject to federal income tax 

withholding under section 3401(a)), and 

amounts paid for domestic service in a 

private home, local college club, or local 

chapter of a college fraternity or sorority. 

Usually, this is the amount shown in box 

1 of Form W-2, Wage and Tax 

Statement. For further information, see 

Pub. 15, Circular E, Employer’s Tax 

Guide. Compensation also includes the 

salary reduction contributions made 

under this plan, and, if applicable, 

compensation deferred under a section 

457 plan. In determining an employee’s 

compensation for prior years, the 

employee’s elective deferrals under a 

section 401(k) plan, a SARSEP, or a 

section 403(b) annuity contract are also 

included in the employee’s 

compensation. 

For self-employed individuals, 

compensation means the net earnings 

from self-employment determined under 

section 1402(a), without regard to 

section 1402(c)(6), prior to subtracting 

any contributions made pursuant to this 

SIMPLE IRA plan on behalf of the 

individual. 

* This is the amount for 2012. For later years, the limit may be increased for cost-of-living adjustments. The IRS announces the increase, if any, in a news release, in 

the Internal Revenue Bulletin, and on the IRS’s website at IRS.gov. 
Form 5305-SIMPLE (Rev. 3-2012) Page 6 

Employee Notification 

You must notify eligible employees prior 

to the employees’ 60-day election period 

described previously that they can make 

or change salary reduction elections. In 

this notification, you must indicate 

whether you will provide: 

1. A matching contribution equal to 

your employees’ salary reduction 

contributions up to a limit of 3% of their 

compensation; 

2. A matching contribution equal to 

your employees’ salary reduction 

contributions subject to a percentage 

limit that is between 1 and 3% of their 

compensation; or 

3. A nonelective contribution equal to 

2% of your employees’ compensation. 

You can use the Model Notification to 

Eligible Employees to satisfy these 

employee notification requirements for 

this SIMPLE IRA plan. A Summary 

Description must also be provided to 

eligible employees at this time. This 

summary description requirement may 

be satisfied by providing a completed 

copy of pages 1 and 2 of Form 

5305-SIMPLE (including the Article VI 

Procedures for Withdrawals and 

Transfers from the SIMPLE IRAs 

established under this SIMPLE IRA plan). 

If you fail to provide the employee 

notification (including the summary 

description) described above, you will be 

liable for a penalty of $50 per day until 

the notification is provided. If you can 

show that the failure was due to 

reasonable cause, the penalty will not be 

imposed. 

Reporting Requirements 

You are not required to file any annual 

information returns for your SIMPLE IRA 

plan, such as Form 5500, Annual 

Return/Report of Employee Benefit Plan 

or Form 5500-EZ, Annual Return of 

One-Participant (Owners and Their 

Spouses) Retirement Plan. However, you 

must report to the IRS which eligible 

employees are active participants in the 

SIMPLE IRA plan and the amount of 

your employees’ salary reduction 

contributions to the SIMPLE IRA plan on 

Form W-2. These contributions are 

subject to social security, Medicare, 

railroad retirement, and federal 

unemployment tax. 

Deducting Contributions 

Contributions to this SIMPLE IRA plan 

are deductible in your tax year 

containing the end of the calendar year 

for which the contributions are made. 

Contributions will be treated as made 

for a particular tax year if they are made 

for that year and are made by the due 

date (including extensions) of your 

income tax return for that year. 

Choosing the Designated 

Financial Institution 

As indicated in Article V, item 4, a 

designated financial institution is a 

trustee, custodian, or insurance 

company (that issues annuity contracts) 

for the SIMPLE IRA plan that would 

receive all contributions made pursuant 

to the SIMPLE IRA plan and deposit the 

contributions to the SIMPLE IRA of each 

eligible employee. 

Only certain financial institutions, such 

as banks, savings and loan associations, 

insured credit unions, insurance 

companies (that issue annuity contracts), 

or IRS-approved nonbank trustees may 

serve as a designated financial institution 

under a SIMPLE IRA plan. 

You are not required to choose a 

designated financial institution for your 

SIMPLE IRA plan. However, if you do not 

want to choose a designated financial 

institution, you cannot use this form (see 

When To Use Form 5305-SIMPLE 

earlier). 

Instructions for the 

Designated Financial 

Institution 

Completing Form 

5305-SIMPLE 

By completing Article VII, you have 

agreed to be the designated financial 

institution for this SIMPLE IRA plan. You 

agree to maintain IRAs on behalf of all 

individuals receiving contributions under 

the plan and to receive all contributions 

made pursuant to this plan and to 

deposit those contributions to the 

SIMPLE IRAs of each eligible employee 

as soon as practicable. You also agree 

that upon the request of a participant, 

you will transfer the participant’s balance 

in a SIMPLE IRA to another IRA without 

cost or penalty to the participant. 

Summary Description 

Each year the SIMPLE IRA plan is in 

effect, you must provide the employer 

the information described in section 

408(l)(2)(B). This requirement may be 

satisfied by providing the employer a 

current copy of Form 5305-SIMPLE 

(including instructions) together with your

procedures for withdrawals and transfers 

from the SIMPLE IRAs established under 

this SIMPLE IRA plan. The summary 

description must be received by the 

employer in sufficient time to comply 

with the Employee Notification 

requirements on this page. 

If you fail to provide the summary 

description described above, you will be 

liable for a penalty of $50 per day until 

the notification is provided. If you can 

show that the failure was due to 

reasonable cause, the penalty will not be 

imposed. 

Paperwork Reduction Act Notice. You 

are not required to provide the 

information requested on a form that is 

subject to the Paperwork Reduction Act 

unless the form displays a valid OMB 

control number. Books or records 

relating to a form or its instructions must 

be retained as long as their contents 

may become material in the 

administration of any Internal Revenue 

law. Generally, tax returns and return 

information are confidential, as required 

by section 6103. 

The time needed to complete this 

form will vary depending on individual 

circumstances. The estimated average 

time is: 

Recordkeeping . . . . 3 hr., 38 min. 

Learning about the 

law or the form . . . . 2 hr., 26 min. 

Preparing the form . . . . 47 min. 

If you have comments concerning the 

accuracy of these time estimates or 

suggestions for making this form 

simpler, we would be happy to hear 

from you. You can write to the Internal 

Revenue Service, Tax Products 

Coordinating Committee, 

SE:W:CAR:MP:T:M:S, 1111 Constitution 

Ave. NW, IR-6526, Washington, DC 

20224. Do not send this form to this 

address. Instead, keep it for your 

records.