SIMPLE IRA

[Jeannine]

A husband and wife are both self-employed and 50% owner of each other's companies.  Wife's company has (1) W-2 employee.  Husband's company is hiring (1) W-2 employee.  They want to start a Simple IRA under wife's company, they will both participant including the employee under wife's company.  Can employee (2) under husband's company also join the Simple?  Or would each company need to set up their own Simple IRA?

Thanks!

[Belgarath]

Not only CAN the employee # 2 participate, employee # 2 MUST be allowed to participate, assuming #2 has satisfied the eligibility requirements under the SIMPLE document. Take a look at the instructions on the SIMPLE document, "Which Employers May Establish and Maintain a SIMPLE IRA Plan."

[Jeannine]

Thank you!  From the information I found, it looks like the plan cannot be effective  before the plan is adopted.  So, it looks like we cannot date the Simple IRA for year 1 as January and must select a date of March 1, for example?  From an employee side (W-2), they can't make up the contributions from January to March, correct?  Is the employer's match or non-elective prorated based on EE salary from March to December or can they contribute based on full year comp?