Proposed Legislation May Affect Your SIMPLE IRA Plan Documents

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By Lisa Walker, CISP, CHSP

Comprehensive retirement savings legislation has recently been in the works and, while it may be at a standstill now, many of the proposed provisions seem likely to stick around for enactment at some point in the future. One promising provision could affect SIMPLE IRA plans. This proposed provision would allow employers to take advantage of a new tax credit if they automatically enroll employees in their SIMPLE IRA plans at a certain default percentage—but only if their plan documents allow for an automatic enrollment feature.

What does this mean for your small business owner clients who offer a SIMPLE IRA plan? Well, if their plan is on the IRS model document, they would need to amend their plan to a prototype document that allows for automatic enrollment (and any other provisions that could become law and are not already permitted on the model document). If their SIMPLE IRA plan is already on a prototype document, they may need to amend to a document that can accommodate the automatic enrollment feature.

If unfamiliar with how a plan is amended, an employer may be unprepared to benefit from the automatic enrollment credit if it becomes law. Worse, if the employer implements automatic enrollment without ensuring that the plan document supports it, an operational failure will occur, which may require participation in an IRS correction program—likely with a cost attached. The IRS issued guidance in 2009 addressing automatic enrollment in SIMPLE IRA plans, but to date has failed to issue model documents that accommodate this feature.

SIMPLE IRA Prototype Plan Document

To help your clients avoid one of these negative outcomes, consider offering SIMPLE IRA prototype plan documents that allow for plan provisions that the IRS model forms may not. If your organization already sponsors a prototype SIMPLE IRA plan document, you may want to review its provisions to determine whether it can accommodate the automatic enrollment process. If not, consider sponsoring one that does for your small business clients. One such option that is already available is Ascensus’ SIMPLE IRA prototype plan document. 

The Ascensus SIMPLE IRA prototype plan document comes in a standard format but can be customized to fit your organization’s needs, including identifiers like your logo and preferred typestyle, and preferred layout of information. Offering Ascensus’ SIMPLE IRA prototype plan document will help ensure that your clients are prepared for what’s to come, setting them up to make the most of the latest plan features.

Potential law changes provide an opportunity for your organization to help existing small business clients and to gain new clients. Call 800-346-3860 or email an Ascensus Sales Representative to learn more about Ascensus’ prototype document solutions.