Advanced Underwriting Consultants

Question of the Day – March 22

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question:  What is the deadline for an employer to deposit employees’ contributions into their SIMPLE plan accounts?

Answer:  The deadline for depositing employee deferral is the end of the month following the month in which the employee, but for the deferral, would have been paid the compensation in cash.

The deadline for employer contributions is the due date for the return for the year in question, including extensions.

From the Department of Labor’s website (http://www.dol.gov/ebsa/pdf/simpleIRA.pdf):

Depositing and Investing Plan Contributions

Employee contributions must be deposited in the financial institution serving as trustee for the plan within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. Your employer contributions must be made by the due date (including extensions) for filing your business’s Federal income tax return for the year.

Failure to deposit employee deferrals on a timely basis is a serious issue for the employer, akin to failing to deposit employee payroll tax deposits in a timely manner.

If timely deposits were not made, the IRS has instructions for how an employer can self-report and address the mistake.  Here’s a link to a description of the overview:  http://www.irs.gov/pub/irs-tege/simple_fixit_guide.pdf.  See item 7.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day. 

Question of the Day – June 12

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers.  Here’s the question of the day.

Question: What is a SIMPLE plan and how can an employer implement one?

Answer: A savings incentive match plan for employees (SIMPLE) is a kind of qualified plan usually designed to have an employer and employee both contribute to the employee’s retirement.  Under the most basic SIMPLE arrangement, an employer creates special SIMPLE IRAs for eligible employees, and both make the kinds of contributions described below.

A SIMPLE plan is similar to a Section 401(K) plan in the way that it works.  In fact, a SIMPLE plan can be a part of a 401(K) plan; a variant known as a SIMPLE 401(K) plan.

Only those employers with 100 or fewer eligible employees may set up and maintain a SIMPLE IRA plan.

For most employers, implementing a SIMPLE IRA plan is a three-step process:

  1. Fill out and sign either IRS Form 5304-SIMPLE (if the participants have control over where their SIMPLE IRAs are established) or Form 5305-SIMPLE (if the employer controls where the SIMPLE IRAs are established).
  2. Give each employee a copy of the completed page 3 of Form 5304 or 5305
  3. Make sure each eligible employee has a SIMPLE IRA set up to accept SIMPLE contributions

As with a SEP IRA plan, it is possible for an employer to create a customized SIMPLE IRA document.  However, most use the standard IRS forms.

A SIMPLE IRA may usually only be created for a particular tax year between January 1 and October 1 for the given year.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.