Form 5304-SIMPLE

(Rev. March 2012) 

Department of the Treasury 

Internal Revenue Service 

Savings Incentive Match Plan 

for Employees of Small Employers (SIMPLE)—Not 

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 IRA established by 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 the 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. 

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 (for example, 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) for each eligible employee to the SIMPLE IRA established at the financial 

institution selected by that employee 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) for each eligible employee to the SIMPLE 

IRA established at the financial institution selected by that employee 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 the instructions. Cat. No. 23377W Form 5304-SIMPLE (Rev. 3-2012) 
Form 5304-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 Selection of IRA Trustee. The Employer must permit each eligible employee to select the financial institution that will serve as the trustee, 

custodian, or issuer of the SIMPLE IRA to which the Employer will make all contributions on behalf of that employee. 

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 under 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 the 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 SIMPLE IRA. A SIMPLE IRA is an individual retirement account described in section 408(a), or an individual retirement annuity described in 

section 408(b), to which the only contributions that can be made are contributions under a SIMPLE IRA plan and rollovers or transfers from 

another SIMPLE IRA. 

Article VI—Procedures for Withdrawals (The Employer will provide each employee with the procedures for withdrawals 

of contributions received by the financial institution selected by that employee, and that financial institution’s name and 

address (by attaching that information or inserting it in the space below) unless: (1) that financial institution’s procedures 

are unavailable, or (2) that financial institution provides the procedures directly to the employee. See Employee 

Notification in the instructions.) 

Article VII—Effective Date 

This SIMPLE IRA plan is effective . See 

instructions. 

* * * * * 

Name of Employer 

Address of Employer 

By: Signature Date 

Name and title 

Form 5304-SIMPLE (Rev. 3-2012) 
Form 5304-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). 

IV. Employee Selection of Financial Institution 

You must select the financial institution that will serve as the trustee, custodian, or issuer of your SIMPLE IRA and notify your Employer of 

your selection. 

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. Employee Selection of Financial Institution 

I select the following financial institution to serve as the trustee, custodian, or issuer of my SIMPLE IRA. 

Name of financial institution 

Address of financial institution 

SIMPLE IRA account name and number 

I understand that I must establish a SIMPLE IRA to receive any contributions made on my behalf under this SIMPLE IRA plan. If the 

information regarding my SIMPLE IRA is incomplete when I first submit my salary reduction agreement, I realize that it must be completed by 

the date contributions must be made under the SIMPLE IRA plan. If I fail to update my agreement to provide this information by that date, I 

understand that my Employer may select a financial institution for my SIMPLE IRA. 

V. 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 5304-SIMPLE (Rev. 3-2012) 
Form 5304-SIMPLE (Rev. 3-2012) Page 4 

General Instructions 

Section references are to the Internal 

Revenue Code unless otherwise noted. 

Purpose of Form 

Form 5304-SIMPLE is a model Savings 

Incentive Match Plan for Employees of 

Small Employers (SIMPLE) plan 

document that an employer may use to 

establish a SIMPLE IRA plan described 

in section 408(p), under which each 

eligible employee is permitted to select 

the financial institution for his or her 

SIMPLE IRA. 

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 5304-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 5304-SIMPLE to establish a 

model Savings Incentive Match Plan, 

you are not required to use this version 

of the form. 

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 and 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 IRA 

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 financial institution selected by 

him or her. 

When To Use Form 

5304-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 5304-SIMPLE if: 

1. You want to require that all SIMPLE 

IRA plan contributions initially go to a 

financial institution designated by you. 

That is, you do not want to permit each 

of your eligible employees to choose a 

financial institution that will initially 

receive contributions. Instead, use Form 

5305-SIMPLE, Savings Incentive Match 

Plan for Employees of Small Employers 

(SIMPLE)—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 

5304-SIMPLE 

Pages 1 and 2 of Form 5304-SIMPLE 

contain the operative provisions of your 

SIMPLE IRA plan. This SIMPLE IRA plan 

is considered adopted when you have 

completed all applicable boxes and 

blanks and it has been executed by you. 

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? above. 

Salary Reduction 

Agreements (Article II) 

As indicated in Article II, item 1, a salary 

reduction agreement permits an eligible 

employee to make a salary reduction 

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 
Form 5304-SIMPLE (Rev. 3-2012) Page 5 

the reduction in the employee’s 

compensation cannot exceed the 

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 any 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 financial institution 

selected by each eligible employee. 

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, below. 

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 above. 

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 above. 

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 financial 

institution selected by each eligible 

employee for his or her SIMPLE IRA 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 

each participant’s SIMPLE IRA 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. 

Employee Notification 

You must notify each eligible employee 

prior to the employee’s 60-day election 

period described above that he or she can 

make or change salary reduction elections 

and select the financial institution that will 

serve as the trustee, custodian, or 

*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 5304-SIMPLE (Rev. 3-2012) Page 6 

issuer of the employee’s SIMPLE IRA. 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 earlier 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 5304-SIMPLE (including 

the information described in 

Article VI—Procedures for Withdrawals). 

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. 

If the financial institution’s name, 

address, or withdrawal procedures are 

not available at the time the employee 

must be given the summary description, 

you must provide the summary 

description without this information. In 

that case, you will have reasonable 

cause for not including this information 

in the summary description, but only if 

you ensure that it is provided to the 

employee as soon as administratively 

feasible. 

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. 

Summary Description 

Each year the SIMPLE IRA plan is in 

effect, the financial institution for the 

SIMPLE IRA of each eligible employee 

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 5304-SIMPLE 

(including instructions) together with the 

financial institution’s procedures for 

withdrawals from SIMPLE IRAs 

established at that financial institution, 

including the financial institution’s name 

and address. The summary description 

must be received by the employer in 

sufficient time to comply with the 

Employee Notification requirements 

earlier. 

There is a penalty of $50 per day 

imposed on the financial institution for 

each failure to provide the summary 

description described above. However, if 

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 with your 

records.