Guest robmc Posted January 31, 2013 Share Posted January 31, 2013 I have been researching a question and I have been unable to get an answer online, in any of my text books, or from qualified CPA's that I know. I set up a SIMPLE IRA for a small business. We used the typical IRA guidelines for eligibility that an employee would need to make 5k in 2 preceeding years, with an expectation to make 5k in the 3rd. Now the business wishes to hire a talented individual right now and start him in the plan immediately. I know we can reduce the income requirements and years of service requirements, however can I do that in January and allow this new hire to start contributing right away? Furthermore, I am assuming if we do change the eligibility requirements to virtually nothing.. any new hire moving forward would need to be immediately eligible as well? In other words...no exception for one person. Any information would be great Link to comment Share on other sites More sharing options...
ETA Consulting LLC Posted January 31, 2013 Share Posted January 31, 2013 You could amend to reduce the eligibility to zero, but that would've needed to be done prior to the 60-day notification period. When you provided that notice to employees by November 1st (for the 2013 year), that is it for that year. You can change the eligiblity to 5K in 1 year when you issue the notice for the 2014 year. Good Luck! CPC, QPA, QKA, TGPC, ERPA Link to comment Share on other sites More sharing options...
Guest robmc Posted January 31, 2013 Share Posted January 31, 2013 Thank you for your response. I have been starting to fear that was the case. In this stiuation... every employee is participating in the plan. For informational pruposes... lets say I did give those employees a notice of the reduced requirement that you only had to be expected to make 5k in your first year. Would a new hire be able to start contributing at the point he/she is hired during the year, or would they still have to wait for January of next year? Link to comment Share on other sites More sharing options...
ETA Consulting LLC Posted January 31, 2013 Share Posted January 31, 2013 You'd have to wait until January. There are no mid-year amendments. You issue the 60-day notice and continue to follow the terms throughout the year; very simplistic by design. In qualified plans, you'd have more flexibility with respect to eligibility. This ship as sailed for this year. Good Luck! CPC, QPA, QKA, TGPC, ERPA Link to comment Share on other sites More sharing options...
Guest robmc Posted January 31, 2013 Share Posted January 31, 2013 Right, I'm sorry I was not clear. If I had given the notice last October that we were reducing the requirements to just "an expectation that you would make 5k in your 1st year" then could you start any new hire in the plan immediately who meets that qualification? Link to comment Share on other sites More sharing options...
ETA Consulting LLC Posted January 31, 2013 Share Posted January 31, 2013 Correct. CPC, QPA, QKA, TGPC, ERPA Link to comment Share on other sites More sharing options...
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