Simple IRA - For previous year

[Guest archimedes_pie]

I have two scenarios to pitch.

First, my wife is in a small company where they would like to set up a SIMPLE IRA. Only her and her two brothers (the owners) would participate in the SIMPLE. They would like to set up the plan and contribute the maximum amounts for the 2005 tax year, via bonus checks backdated to DEC 31st. Is this possible? I know the IRS requires the program to be in place before OCT 1st of 2005 in order to notifying all employees of the plan. IS there a way around this, (for example, could they create a form dated earlier in the year and have each employee decline participation?) (FYI: they have maybe 15 other employees none of which would participate when asked, as many of them make so little, and may very well be illegal aliens, this issue is a constant battle for my wife, since they supply fake ssn, and the social security administration takes their payments till the end of the year, then informs her that the numbers are not valid, and do not return the money. (Whole other topic, sorry!))

Second, if they cannot create the plan in the previous year(by dubious means I know!), can they elect 100% employee deferral and each receive a bonus check of $10,828.37 which after taxes would meet their 2006 contribution limits for the year? Afterwards, would the company still match their payroll checks throughout the year by 3% since the $10,000 will work out to be much more than 3% of their overall compensation?

Finally, they are trying to use Ameritrade to be the designated financial institution. Has anyone tried to use them? They aren't set up to receive payments electronically, and I'm not sure they would even track employee vs. employer contributions. Although, I do believe they must file with the IRS the total contributions made for each person in each year, is this correct?

Thanks

[Bird]

No they can't do anything for 2005. Period.

I'm not sure I undertand the second part, but if an employee contributes more than 3% of pay, then the employer match (if that's what is elected) will be 3% of pay. It doesn't matter when the money went in.

[Guest mjb]

Why not look at a SEP plan which can be established after the end of the plan yr and permits non discriminatory contributions of up to 20% of net earnings from self employment? Employer can exclude employees who have not performed service in 3 of preceeding 5 years or who have less than $450 in compensation. See IRS publication 560.