Employers Must Be In Compliance With The Simple IRA Deadline

For employers who are considering a retirement plan for employees, the simple IRA deadline must be taken into account if this plan is chosen.

There can be tax penalties and ramifications if employers do not honor the simple IRA deadline.

Simple IRA Deadline - When Employers Should Set Up the Plan

Employers who wish to set up an IRA plan for employees can begin on any date that is between January 1 through October 1. One exception is if the plan sponsor previously established a simple IRA plan. The new simple IRA can be effective only on January 1.

The simple IRA retirement plan is only for employers that have 100 or less employees. If, however, an employer increases its workforce to exceed the 100 limitation, that employer has a two calendar year grace period to continue with the same rules.

The two year grace period has different requirements if the change in the number of employees is the result of an acquisition or similar business transaction type.

Other Simple IRA Deadline Constraints Employers Should Consider

There are other simple IRA deadlines which employers must consider as they set up and maintain this type of retirement plan.

One important factor associated with a simple IRA deadline is directly related to the amount of taxes the employer might otherwise be required to pay.

Exceptions to the Simple IRA Plan for Employers

As a general rule, employers cannot make contributions to a simple IRA plan during a calendar year where contributions are made under another retirement plan for employees.

Employers can, however, make contributions to a simple IRA during a calendar year that contributions are made to another plan if:

  • Employees who are covered under the other retirement plan are also a part of a collective bargaining agreement; or
  • Another company acquires the employer's business during the calendar year in which the simple IRA is active.

The simple IRA deadline for a new employer to establish a plan may occur after October 1 if the business starts after this date.

Many employers may choose to offer the simple IRA to its employees because of the ease in administering the plan. There are not annual reporting requirements associated with this plan, so the benefits department can easily manage the contributions without worrying about additionally paperwork.

Employers just need to make sure that contributions are deposited into each employee's investment account prior to the first date that is required, usually 30 days after the account is established.

 

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