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SIMPLE - any vendors that handle missing participant IRA's


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A SIMPLE plan has to do a VCP correction for improperly excluding employees for many years. Many of these former employees won't respond to employer letter asking them to set up a SIMPLE-IRA to receive a contribution. (amazing, isn't it?)

Their current SIMPLE-IRA investment provider won't allow the employer to set up a SIMPLE-IRA for a former employee - they say the EMPLOYEE must set it up.

Do you know of any vendors who will allow the employer to set up a SIMPLE-IRA on behalf of a non-responsive former employee?

This really should be the broker's job, but the broker isn't doing it...

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  • 5 months later...

Establishing an account to receive the contributions is not necessary under the EPCRS.

The EPCRS (Revenue Procedure 2013-12) does contain the following guidance--

"(d) Locating lost participants. (i) Reasonable actions must be taken to find all current and
former participants and beneficiaries to whom additional benefits are due, but who have not
been located after a mailing to the last known address. In general, such actions include, but
are not limited to, a mailing to the individual’s last known address using certified mail, and, if
that is unsuccessful, an additional search method, such as the use of the Social Security letter
forwarding program, a commercial locator service, a credit reporting agency, or Internet search
tools. Depending on the facts and circumstances, the use of more than one of these additional
search methods may be appropriate. A plan will not be considered to have failed to correct a
failure due to the inability to locate an individual if reasonable actions to locate the individual
have been undertaken in accordance with this paragraph; provided that, if the individual is later
located, the additional benefits are provided to the individual at that time."

"(ii) The IRS Letter Forwarding Program is no longer available....." {EMPHASIS ADDED.}

Hope this helps.

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Hi Gary - thanks for the response, but these former employees have been "located." Their addresses are known. If you feel comfortable with a non-responsive employee not being considered "located" that's fine, but the plan sponsor wants to get these contributions made and be done with it.

As it so happens, subsequent to the original posting, the vendor decided they could modify some procedure or other and agreed to establish the accounts. But for future reference, thank you for your response.

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  • 2 weeks later...

Belgarath, I see your point. Since current addresses are known, establishing SIMPLE IRAs should be satisfactory. Banks are more likely to establish an account for a recalcitrant employee.

It might be helpful to provide the financial institution with a copy of IRS Notice 98-4. Q&A G-4 of that Notice regarding Administrative Requirements reads as follows:

Q. G4: What if an eligible employee is unwilling or unable to establish a SIMPLE IRA?

A. G4: If an eligible employee who is entitled to a contribution under a SIMPLE IRA Plan is unwilling or unable to establish a SIMPLE IRA with any financial institution prior to the date on which the contribution is required to be made to the SIMPLE IRA of the employee under Q&A G5 or G6, an employer may execute the necessary documents to establish a SIMPLE IRA on the employee’s behalf with a financial institution selected by the employer.
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