IRS Releases Updated Traditional, Roth, and SIMPLE IRA Model Documents

The IRS released updated IRA model documents early in September 2017, which are used to establish Traditional, Roth, and SIMPLE IRAs. These documents have been updated for law changes and contribution limit increases that have occurred in the past few years. The IRS does not update these documents every year for such changes, and financial organization staff and
clients can be confused by the inaccurate or incorrect information in the outdated documents. So these new updated documents will make IRA administration a little easier.

The IRS’ IRA model documents are used by document providers, such as Ascensus, as a basis for their IRA plan agreements. As of this writing, the IRS has not provided any specific information regarding the use of the new documents or amendments to existing IRAs as a result of them. Ascensus has contacted the IRS to inquire.

The updated IRS forms, which carry April 2017 revision dates, include the following.

  • Form 5305, Traditional Individual Retirement Trust Account
  • Form 5305-A, Traditional Individual Retirement Custodial Account
  • Form 5305-R, Roth Individual Retirement Trust Account
  • Form 5305-RA, Roth Individual Retirement Custodial Account
  • Form 5305-RB, Roth Individual Retirement Annuity Endorsement
  • Form 5305-S, SIMPLE Individual Retirement Trust Account
  • Form 5305-SA, SIMPLE Individual Retirement Custodial Account

Outdated and Incorrect Information in the Prior Versions

The IRS issued a similar set of IRA model documents earlier in 2017, with the exception of the Roth IRA annuity endorsement (Form 5305-RB had not been updated since 2002). Those documents had October 2016 revision dates and although updated, some contained outdated or inconsistent details that were not in line with past law changes. The IRS appears to have fixed these issues with the latest updates. The new April 2017 version documents include the following updates.

New Account Number Box

One of the changes to the October 2016 documents was the removal of Social Security number boxes, presumably removed for privacy/security reasons. However those form instructions still contained information stating that Social Security numbers would serve as identification number for the IRAs. In the updated April 2017 documents, the IRS deleted that information in the instructions and added an “Account number” box.

Contribution and Eligibility Limitations Updated to Current Figures

The former documents included old figures (2010 and earlier) for IRA contribution limits, IRA deduction income limits, and Roth IRA eligibility income limits. The new documents have been revised to include 2017 figures with language stating that they are subject to cost-of-living adjustments.

Incorrect and Outdated IRA Conversion Information Removed

The previous documents contained invalid information about Roth IRA conversions. To correct the applicable new documents, the IRS deleted two references. One reference incorrectly stated that conversions were subject to the regular (annual) contribution limit, and the other reference was an outdated rule stating that income restrictions applied for Roth IRA conversions.

Information Added on Retirement Plan/Traditional IRA Rollovers to SIMPLE IRAs

Language was added to the SIMPLE IRA documents stating that the financial organization may accept “transfers and rollovers” from eligible retirement plans under IRC Sec. 402(c)(8)(B), which includes Traditional IRAs and certain employer-sponsored retirement plans, into SIMPLE IRAs after a SIMPLE IRA two-year participation period. This new rollover option was created by the Consolidated Appropriations Act of 2016.

Clarification About Additional Provisions Added to the Document

The IRA documents state that financial organizations can add language for additional provisions in Article VIII for Traditional and SIMPLE IRA, and Article IX for Roth IRA documents. The IRS cautions in the new documents that the added provisions cannot imply that they have been reviewed or approved by the IRS.