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MjInvestments

SIMPLE IRA - Move from 5305 to 5304

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We have a client who owns a small business. The small business operates a SIMPLE IRA with the 5305-SIMPLE form being the governing document.  She wants to move her account to our firm to manage the investments, but not force the other partners & employees to move their accounts.  Obviously this would mean amending the plan to be governed by a 5304 document. Can she amend the plan to be a 5304 whenever, or would it be subject to the 11/2 (60 Day) notices?

Are there any other issues I am not thinking of that could be of concern?  I thought about the two year rule, but this is SIMPLE IRA to SIMPLE IRA so we are good and I think her account is older than 2 years. 

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I think it is ok but now you are effectively letting everyone do whatever they want and it can prove to be a hassle for the sponsor.  If it's past 2 years you might consider a rollover to a regular IRA for the existing money (and new money periodically) and leave the rest of the SIMPLE alone.

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23 hours ago, MjInvestments said:

We have a client who owns a small business. The small business operates a SIMPLE IRA with the 5305-SIMPLE form being the governing document.  She wants to move her account to our firm to manage the investments, but not force the other partners & employees to move their accounts.  Obviously this would mean amending the plan to be governed by a 5304 document. Can she amend the plan to be a 5304 whenever, or would it be subject to the 11/2 (60 Day) notices?

Are there any other issues I am not thinking of that could be of concern?  I thought about the two year rule, but this is SIMPLE IRA to SIMPLE IRA so we are good and I think her account is older than 2 years. 

Amending the plan is not required, just for her to transfer her account to you. She can establish her account with you, and transfer her balance to you, when permitted . She would need to provide you with a copy of the Form 5305-SIMPLE . So, for her account with you, the documents would be a copy of the Form 5305-SIMPLE that was used to establish the plan and your firm's SIMPLE IRA Adoption agreement ( Form 5304-S or Form 5304-SA). All new SIMPLE IRA contributions would need to be made to her old account ( because of the DFI rule under Form 5305-SIMPLE), so that would have to be kept open, and the contributions can then be transferred to the account with you, when permitted ( there might be restrictions on when amounts can be transferred- those, those are hardly ever instituted).  Each employee is permitted to do this. The account with you would not be eligible to accept new SIMPLE contributions- only transfers and rollovers.

A SIMPLE can be amended only as of January 1 of a year .The amendment should conform to the 60-day notice. So it might be too late for 2020.  If the plan is amended to a Form 5304 , then all the participants would be permitted to choose their own custodian ( No DFI)

 

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