Jump to content

SIMPLE IRA - Move from 5305 to 5304


Recommended Posts

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. 

Link to comment
Share on other sites

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.

Ed Snyder

Link to comment
Share on other sites

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)

 

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...