Subscribe (Free) to
Daily or Weekly Newsletters
Post a Job

Featured Jobs

DB/DC Administrator

Primark Benefits
(Remote / San Mateo CA)

Primark Benefits logo

Retirement Plan Relationship Manager – DB or DC Focus

Trinity Pension Consultants
(Remote / Akron OH / AL / IN / KY / MO / TN)

Trinity Pension Consultants logo

Senior Defined Contribution Account Manager

Nova 401(k) Associates

Nova 401(k) Associates logo

Pension Administrator

(Remote / Phoenix AZ)

MGKS logo

Retirement Plan Administrator

Hessel & Associates, LLC
(Remote / IL)

Hessel & Associates, LLC logo

401(k) Retirement Plan Administrator

Midwest TPA with Remote Workforce
(Remote / Beachwood OH)

Retirement Plan Administrator

Hicks Pension Services

Hicks Pension Services logo

Manager - Defined Contribution Plans

M2B Retirement Consulting LLC
(Remote / Wexford PA)

M2B Retirement Consulting LLC logo

DC Administrator

United Benefit Pensions Inc.
(Remote / Melville NY)

United Benefit Pensions Inc. logo

Plan Administrator Consultant

Jocelyn Pension Consulting
(Remote / Boulder CO)

Jocelyn Pension Consulting logo

Retirement Plan Administrator

CMC Pension Professionals

CMC Pension Professionals logo

Chief Pension Actuary

Loren D. Stark Company

Loren D. Stark Company logo

Director of Pension Administration

Primark Benefits
(Remote / San Mateo CA)

Primark Benefits logo

Enrolled Actuary

Loren D. Stark Company

Loren D. Stark Company logo

Distribution \ Loan Clerk

Retirement, LLC
(Remote / Oklahoma City OK)

Retirement, LLC logo

Compliance Specialist II



Plan Administrator

Aimpoint Pension
(Remote / Pompano Beach FL)

Aimpoint Pension logo

Site Manager / Senior Administrator

Nicholas Pension Consultants
(Remote / AZ / ID / NM / NV / UT)

Nicholas Pension Consultants logo

View More Employee Benefits Jobs

Free Newsletters

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

SIMPLE IRAs and Related Employers

(Posted June 14, 2000)

Question 50: A client of mine is being told by a salesman that a "SIMPLE IRA" plan can be sponsored by one of my client's corporations even though it would cover only the employees of that corporation, not others under common control. If the common control rules apply, the group has too many employees to be eligible to sponsor a SIMPLE IRA plan. The salesman says the rules have changed. Is that right?

Answer: You are wise to question what the salesman is telling you. The rules are quite specific and have not changed on this point.

IRC Sec. 408(p)(4) sets for the participation requirements that a SIMPLE IRA must meet:

(4) Participation requirements. --

(A) In general. --

The requirements of this paragraph are met with respect to any simple retirement account for a year only if, under the qualified salary reduction arrangement, all employees of the employer who --

(i) received at least $5,000 in compensation from the employer during any 2 preceding years, and

(ii) are reasonably expected to receive at least $5,000 in compensation during the year,

are eligible to make the election under paragraph (2)(A)(i) or receive the nonelective contribution described in paragraph (2)(B).

(B) Excludable employees. --

An employer may elect to exclude from the requirement under subparagraph (A) employees described in section 410(b)(3).

In other words, essentially if someone is an employee making $5000, they must be included unless they are (a) a union employee under a collectively bargained plan; or (b) a nonresident alien without US source income.

So, the only question is, are the employees of these related entities treated as employees of the SIMPLE IRA sponsor? And the answer is yes. IRC 414(b) says, "For purposes of sections 401, 408(k), 408(p), 410, 411, 415, and 416, all employees of all corporations which are members of a controlled group of corporations (within the meaning of section 1563(a), determined without regard to section 1563(a)(4) and (e)(3)(C)) shall be treated as employed by a single employer."

So, if you work for a company that is in a controlled group with a SIMPLE IRA sponsor, you are deemed to be an employee of the sponsor. Combine this with the eligibility requirement of 408(p), and you can see that these workers cannot be excluded (unless they make less than $5,000, are union employees, or nonresident aliens).

Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.

Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2022, Inc.