Jump to content

Amending SIMPLE IRA eligibility


Guest kdm
 Share

Recommended Posts

Several years ago Gary Lesser mentioned that it is prohibited to make SIMPLE IRA eligibility more restrictive for the current year under tempory and final regulations. Can anyone tell me what code sections or regulation numbers cover this area?

Link to comment
Share on other sites

The SIMPLE-IRA eligibility requirements for the current year can be amended. However, any amendment can become effective only at the beginning of a CY and MUST conform to the content of the plan notice for the CY. See LRM#18 (Simple, SEP, and SARSEP Answer Book, 8th Ed, page L-24).

If amending for a future year, there is an unresolved issue relating to "rolling eligibility" that has never been addressed. In a QP, discrimination could result if HCEs could not have met the eligibility requirements at the time the plan was originally effective. That being said, in other cases, there shd be no problem in the case of a SIMPLE.

Link to comment
Share on other sites

Hey Gary, your latest response on more restrictive SIMPLE IRA eligibility is not consistent with the following post from March of 1999. In that post you said it was prohibited to amend for the current year. Has LRM #18 come into existence since then?

J Samuelson

Guest

Registered: Not Yet

Location:

Posts: N/A

Is it possible for a new corporation to set up an IRA with an initial eligibility of no service/no comp limits and then change it to the basic 2 years/$5,000 and reasonably expected to earn $5,000 in the current year? I have a client who started business in Jan. 1999 and will start taking salary in April 1999. He has not hired any employees yet, but will later in 1999. He wants to become eligible as soon as he starts to take salary but wants any new hires to wait the two years. (I know, it doesn't sound very non-discriminatory, does it?) I was unable to find anything in my research on amending a SIMPLE IRA for more restrictive eligibility requirements. Thank you.

03-24-1999 01:12 AM

Gary Steven Lesser

Guest

Registered: Not Yet

Location:

Posts: N/A

I do not believe there is any authority for the answer you wd like to hear. Technically, the plan can be amended in respect to future years. To amend it for the current year is prohibited under the temorary and final regulations. For future years, it would be best to wait until this question is definitively answered by the IRS. For several yjousand dollars your client could ask for a private letter ruling!

Link to comment
Share on other sites

The first LRM was issued Jan 1998 (but wasn't posted anywhere until later that year). Since the notice for the "current year" specified the eligibility requirements, any change for the "current year" would have been inconsistant with that notice. So, no amendment for the "current year." If the notice contained more restrictive requirements, then the plan could have been amended to conform to that notice. Since your facts didn't state anything to the contrary, I assumed that the notice conformed to the plan. Consider this a better answer. The issue of "rolling eligibility" may still exist.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...