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Good evening. 

I have a simple IRA setup, but Looking back I am stuck on some of the fine print and want to make sure I am doing it right.  Probably over thinking this. My eligibility requirements for example are as follows. For our plan year 2020, you have to be expected to make at least 5 K in 2020, and also have made in 2 preceding years (2018 & 2019). 

What I am stuck on is the second part of the following statement. 

"For a calendar year, an eligible employee may make or modify a salary reduction election during the 60-day period immediately preceding January 1 of that year" - Ok with this

"However, for the year in which the employee becomes eligible to make salary reduction contributions, the period during which the employee may make or modify the election is a 60-day period that includes either the date the employee becomes eligible or the day before"  What is this saying?  My understand that eligibility is based on calendar year, so lets say, an employee  earned 5K in 2018, and 2019, and are expected to in 2020, I would have given them the notification paperwork prior to the 60 day notification period ending Dec 31st. 

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1 hour ago, Doogan said:

Good evening. 

I have a simple IRA setup, but Looking back I am stuck on some of the fine print and want to make sure I am doing it right.  Probably over thinking this. My eligibility requirements for example are as follows. For our plan year 2020, you have to be expected to make at least 5 K in 2020, and also have made in 2 preceding years (2018 & 2019). 

What I am stuck on is the second part of the following statement. 

"For a calendar year, an eligible employee may make or modify a salary reduction election during the 60-day period immediately preceding January 1 of that year" - Ok with this

"However, for the year in which the employee becomes eligible to make salary reduction contributions, the period during which the employee may make or modify the election is a 60-day period that includes either the date the employee becomes eligible or the day before"  What is this saying?  My understand that eligibility is based on calendar year, so lets say, an employee  earned 5K in 2018, and 2019, and are expected to in 2020, I would have given them the notification paperwork prior to the 60 day notification period ending Dec 31st. 

Your understanding is not correct.  If the participant met the 2018 and 2019 compensation threshold, which he did, and he is EXPECTED to earn over $5k in 2020, he is eligible for 2020 AS OF 1/1/20, not 12/31/20.  A SIMPLE is basically a "two year prior" test of $5k. Normally, that is all that is necessary but if you know an employee has turned in his resignation on 12/15/2019 effective January 15, 2020, you can avoid having him in the plan, but that kind of situation will be a rarity. 

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Thanks for your reply

I understand that the employee would be eligible effective 1/2/2020.  I still don't understand what that second statement means.  "However, for the year in which the employee becomes eligible to make salary reduction contributions, the period during which the employee may make or modify the election is a 60-day period that includes either the date the employee becomes eligible or the day before 

can you give me an example of when it might be applicable. Sorry - just not putting this together

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On 2/21/2020 at 7:25 PM, Doogan said:

Thanks for your reply

I understand that the employee would be eligible effective 1/2/2020.  I still don't understand what that second statement means.  "However, for the year in which the employee becomes eligible to make salary reduction contributions, the period during which the employee may make or modify the election is a 60-day period that includes either the date the employee becomes eligible or the day before 

can you give me an example of when it might be applicable. Sorry - just not putting this together

He's eligible 1/1/20 (not sure why you say 1/2/20).  Anyway, the plain reading is that he has 60 days (counted from 1/1/ or the prior 12/31, but frankly, who cares?) to make his election.  He doesn't have to make it in advance of his eligibility.  Is that better?

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Thank you -

Yes - 1/2/2020 was a typo. 

I guess I am just over reading it and over complicating it. Just want to make sure I am doing it correctly - thank you 

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