SIMPLE IRA in VCP

[Guest BED]

I filed a VCP application for a SIMPLE IRA. The main issue was excluded employees for several years. The employer had not read the plan document and had admitted employees based on what it remembered it had been told by the agent who provided the plan document.

The "missed deferral" of the employees actually participating as calculated by the accountant was 2%. Under Rev Proc 2008-50 Appendix A .05(b) the missed deferral opportunity would be 50% of that amount or a 1% contribution. Under the Streamlined procedures of Appendix F, Schedule 4, the "missed deferral" is assumed to be 3% and the contribution is 1.5%. Because the computation under Appendix A .05(b) was lower, I submitted Appendix D rather than Appendix F.

The agent is saying that the computation under Appendix A.05 does not apply to a SIMPLE IRA because a SIMPLE IRA can not have an actual deferral percentage. The only way to correct the problem is to use the 1.5% calculation described in the Streamlined procedures in Appendix F,Schedule 4.

Does anyone have any experience in dealing with this?

[Gary Lesser]

The 1.5% calculation described in the Streamlined Prcedures (App. F, Sch 4) is correct. A SIMPLE does not have any ADP-type limits.