| Mistake | Find the Mistake | Fix the Mistake | Avoid the Mistake |
|---|---|---|---|
| 1) You haven't updated your SIMPLE IRA plan document for current law changes. | Determine if your plan document is the latest IRS-approved SIMPLE IRA plan document from your financial institution or a current model plan. | Adopt the latest version of your financial institution¡¯s IRS-approved SIMPLE IRA plan document or a current IRS Form 5304-SIMPLE PDF or 5305-SIMPLE PDF. | Make sure you adopt the most current SIMPLE IRA plan document. |
| 2) You have more than 100 employees who earned $5,000 or more in compensation for the prior year. | Review prior year¡¯s compensation data to determine if you had more than 100 employees who earned $5,000 or more in compensation. | Stop all employer and employee contributions to the SIMPLE IRAs. | Prior to establishing a SIMPLE IRA plan, ensure that you meet the requirements. |
| 3) Your business sponsors another qualified retirement plan. | Determine if any employee received an allocation of contributions or accrued a benefit from your other qualified plan. | Stop all employer and employee contributions to the SIMPLE IRAs. | Do not maintain another qualified retirement plan while sponsoring a SIMPLE IRA plan. |
| 4) You excluded an eligible employee from participating. | Review plan document sections on eligibility and participation. Check whether you enrolled employees at the proper time. | Make corrective contributions to place affected employees in the position they would have been in if no mistake was made. | Review the participation status of all employees at least annually. |
| 5) You used the wrong compensation definition to calculate deferrals and contributions to participants' SIMPLE IRAs. | Review the plan document to determine if you're using the proper compensation for deferrals and contributions. | Make corrective contributions to the plan to make up for the employees¡¯ missed deferrals and contributions. | Review the plan¡¯s definition of compensation to ensure that you¡¯re using the correct amount to calculate deferrals and contributions. |
| 6) You made incorrect employer contributions for eligible employees. |
Compare the amounts you contributed for each employee with the contribution percentage provided in the annual notice multiplied by each employee¡¯s compensation. Review records to determine if you timely deposited employer contributions. |
Contribute make-up amounts, adjusted for earnings through the date of correction. For excess contributions, distribute them or use the retention method. |
Establish procedures to ensure that employer contributions are equal to the amount provided for in the annual notice and are timely deposited. |
| 7) You didn¡¯t timely deposit employee elective deferrals. | Compare the dates on which you withheld the elective deferral contributions and the dates on which you contributed them to the employees¡¯ SIMPLE IRAs. | Make corrective contributions for each employee equal to the missed earnings for the period the deposits were late. | Establish procedures to ensure that the employees¡¯ elective deferrals are made per the employees¡¯ elections and are timely deposited. |
| 8) Employer contributions weren¡¯t given to terminated eligible employees. | Review employee payroll data to determine if eligible employees terminated during the year and if they were eligible to receive a contribution. | Make corrective contributions to place affected employees in the position they would have been in if no mistake was made. | Establish administrative procedures to ensure that you make an employer contribution for all eligible employees whether or not they terminated employment during the year. |
| 9) Annual SIMPLE IRA plan notification requirements weren't followed. | Determine if you timely provided the required SIMPLE IRA plan notifications to eligible employees. | Evaluate the impact of the failure to provide the required notices and make a reasonable correction. | Establish procedures to ensure that you timely give required notices to employees. |
SIMPLE IRA Plan Overview
EPCRS Overview
SIMPLE IRA Plan Checklist PDF
IRA-Based Plans Additional Resources