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Concerns w/ Financial Advisor Handling SIMPLE IRA

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Hello.  I need some guidance.  A few years ago (2016), I was hired to manage a company with a SIMPLE IRA. They'd been using the same financial advisor/group to manage the SIMPLE since it was established many years prior.  Since I knew nothing about this type of IRA, I did a bunch of research.  What I found was concerning, though I wasn't confident I fully understood the IRS guidelines.  I spoke with the advisor and he didn't seem able/willing to give me a straight answer, but never told me different when I told him I thought we were doing things incorrectly.  All seemed ok until this year.

We're setup with a 1 year, $5k, 3% match.  The company/advisor was not offering enrollment to all eligible employees - only those hitting the $5k threshold AND classified as fulltime.  The company was requiring a full calendar year of employment before being eligible and then allowing enrollment starting the following Jan 1 (I started March 2016 was told I wasn't eligible until Jan 2018 because I had to be employed for a full year first. Based on what I'd read it was my understanding that I was eligible to start Jan 1, 2017 - which I did).  The advisor was not distributing the annual notice/election information prior to the Nov 1 deadline.

Hopefully I was correct, as I made all of those changes noted above (length of service doesn't matter, just $5k earned in any one previous calendar year to be eligible for start date Jan 1, notices are given out prior to Nov 1 with a 60 day election period for Jan 1 plan start, parttime employees meeting the $5k are eligible, etc.).  I usually have the advisor come out in mid November to meet with each employee to go over their options, answer questions, etc. That gives them time to decide what they want to do, make the election/change and I can be ready for changes come Jan 1.  This year the advisor notified me he is switching all SIMPLE meetings to January.  Is that ok?  Obviously, he can meet with people in January, but don't I want them making their elections/changes during Nov/Dec?  Plus the fact that I then won't have elections/changes until after the start of Jan 1 could mean the initial 2020 contributions could be wrong and make more work for me.

I admit, I don't know SIMPLE IRAs.  However, I don't really feel confident that our financial guy does either.  If my gut is right, I'm ready to find someone else to help us with this.  I realize SIMPLEs are somewhat flexible just because the rules/penalties are pretty loose, but if there are rules, I wan to follow them!  I really appreciate anyone's feedback (even if you tell me that I am the one that's wrong here). Thanks!

Erika

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I don't know that world, but I do know that you need to find an advisor you can trust and who demonstrates that (s)he will put the (all of the) plan participants' needs and interests first, will ensure the plan sponsor employer is compliant with the rules thereby also protecting participant benefits, and who knows and regularly practices in that area instead of someone who may only dabble in that field and/or puts their own self interest first.

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I don't have many answers for you, but wanted to thank you for your thorough post. Often first time posters do not provide enough information and context for their question or concern. For anyone to actually be of help. I think you've provided enough information that someone who does work with SIMPLEs could help you, or at least ask some follow-up questions to try to help. 

I will say that offering a participant the ability to enroll, or make a change to their deferral is separate from the education meeting. Yes, usually one of the functions of the education meeting is to help with those, but there isn't any reason why you can't (you probably should) provide the enrollment and annual information earlier, as in November. And then if employees complete the forms and turn them into you, the updated elections can be implemented by 1/1. If the advisor's only role is to help the participant select their investment line up (and NOT help with enrollments) then a January meeting might be fine. 

Similarly with the notices - some advisors do take on the responsibility of passing out notices, but many don't. For small employers, usually the employer is in the best position to know how to reach employees, or have a last known address if hard copy notices are sent.  

I'm not aware of a fulltime requirement for SIMPLEs. If I recall, the requirement is $5,000 in the prior two years, and an expectation of at least $5,000 in the new year. So if you were hired in 2016, made over $5,000 in 2016 AND 2017, you'd be eligible to participate in the plan starting in 2018. That assumes your SIMPLE plan document ( do you have a copy? Maybe the IRS sample doc was used? Does the adviser have a copy?) doesn't provide for a more generous eligibility (such as immediate upon hire). 

Sounds like the advisor is in the investment only role, and not in the 'day to day administration' or 'ongoing annual operations' role. Either you / the employer will need to fill that role, or hire someone who will. Good luck. 

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19 hours ago, EDB said:

We're setup with a 1 year, $5k, 3% match.  The company/advisor was not offering enrollment to all eligible employees - only those hitting the $5k threshold AND classified as fulltime.  The company was requiring a full calendar year of employment before being eligible and then allowing enrollment starting the following Jan 1 (I started March 2016 was told I wasn't eligible until Jan 2018 because I had to be employed for a full year first. Based on what I'd read it was my understanding that I was eligible to start Jan 1, 2017 - which I did).  The advisor was not distributing the annual notice/election information prior to the Nov 1 deadline.

If the Adoption Agreement says "during any 1 prior year" then you are correct; basically anyone hired in 2016 and earning $5000 is in 1/1/2017.  Those agreements should be read very literally, with no interpretation. 

As far as the meeting date, there's no requirement to have a meeting at all so it doesn't really matter.  Changes can be made at any time so...whatever works for everyone is ok.  But if you want it in November it's hard to see why the advisor would not accommodate that.

SIMPLEs are not actually flexible; the rules are pretty specific.  But there is in fact little or no oversight.  The fact that there is no reporting (i.e. a "tax return" like we do for qualified plans) means that sponsors are generally unwilling to pay for administrative assistance.  It sounds like you have a pretty good handle on how it should be run, but because "we've always done it this way and nobody said anything" you are getting resistance.  It doesn't mean you are wrong.  The investment advisor should stick to the investments end of things and not try to tell you how to run the plan.

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Thank you, Ed.  I really appreciate the feedback and the confirmation that I understand the plan.  I felt like I did, but the advisor is making me feel like I don't.  I think my concern with the January meeting is that new hires from 2019 are eligible for a Jan 1, 2020 start date - and the advisor is the one that helps them fill out the paperwork and sets up their account.  So if he's waiting until January, we're technically missing the 60 day election period and they won't be setup until after the start of the year.  It's the newly eligible people I'm concerned with.  The people already enrolled change their payroll deductions with me whenever they desire and most don't want to meet with the advisor annually anyway.  I believe what I've learned most here is that I need to find a new company to handle our plan!  

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You're welcome.  A couple more things...

I wouldn't worry too much about the 60 day election period.  As long as they get the notice on time you're ok.  (But again, why he wouldn't try to accommodate you is beyond me.)

Changing investment providers isn't necessarily easy - if you have an advisor, he's getting commissions, and that might mean surrender charges if you try to move everything.  You could start over with another company and leave everything where it is (actually it would be up to each participant).  But it might be good to just rip off the band-aid.  

Good luck.

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