EGTRRA Amendment Extension for SIMPLE IRAs

If your SIMPLE IRA plan has not been amended for the tax law changes enacted by EGTRRA by the deadlines contained in Revenue Procedure 2002-10, your plan is no longer eligible to receive tax deferred contributions for yourself or your employees after December 31, 2001. However, amending your plan under the EGTRRA relief initiative will enable you to retain the many favorable tax benefits of your plan.

Employers that sponsor SIMPLE IRAs are being offered an extension through 12/31/2006 to amend their plans for EGTRRA. Sponsors that previously failed to amend their SIMPLE IRAs for EGTRRA may either adopt the latest version of the IRS model SIMPLE IRA plan (revised August 2005) or adopt the SIMPLE IRA plan document that their financial institution has updated for EGTRRA. [Employee Plan News; Retirement News for Employers; SIMPLE IRA Plan Document Compliance and Relief]

Previously, SIMPLE IRA plans needed to be amended for EGTRRA no later than the end of 2002 (or, in the case of prototype SIMPLE IRA plans, 180 days after the plan was approved by the IRS) in order to be eligible for tax preference treatment after 12/31/2001. [Rev. Proc. 2002-10] SIMPLE IRA sponsors may determine if a plan is in compliance by checking the date on the plan document. If an IRS model plan (Form 5304-SIMPLE or Form 5305-SIMPLE) is being used, then the date in the upper left-hand corner should be either March 2002 or August 2005, else an updated version must be completed and signed by 12/31/2006. SIMPLE IRA sponsors not using an IRS model plan should contact the custodian or trustee of the plan to assure updated compliance. See also SIMPLE IRA Plans and the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and FAQs regarding Relief for SIMPLE IRA Plans.

The IRS intends to provide notice of the relief period through individual correspondence to each known SIMPLE IRA sponsor, including those whose plans are already in compliance with EGTRRA. The IRS also encourages SIMPLE IRA plan custodians, trustees, and sponsors of SIMPLE IRA prototype plan documents to remind their clients of the requirement for updated plan documents. [Letter 4083; Letter 4084]