Establishing a SIMPLE IRA

A Security Benefit SIMPLE IRA offers you turnkey sales support to reduce your administrative workload, while providing your small business clients an easy way to provide a retirement plan for their employees. Not only are SIMPLE IRAs, well simple, they are inexpensive and straightforward to set up.

  • No cost to establish
  • No government forms to file
  • No annual reporting
  • No non-discrimination testing
  • Pretax salary deferrals 
  • Minimal employer involvement

Below are some frequently asked questions. You can find more on SIMPLE IRA FAQs Overview, Contributing to a SIMPLE IRA, and Rollovers and Distributions. Visit our SIMPLE IRA page to learn about the Security Benefit SIMPLE IRA.

Who can set up a SIMPLE IRA plan?

Any business with no more than 100 employees can establish a SIMPLE IRA plan for employees who earned $5,000 or more during the preceding calendar year and do not currently have another retirement plan.

More specifically, employers must meet both of the following requirements:

  • In the last calendar year, the employer had no more than 100 employees (including self-employed individuals) who earned $5,000 or more in compensation during the year. If you have a SIMPLE IRA plan but later exceed this 100-employee limit, you will be treated as meeting the limit for the two years following the calendar year in which you last satisfied the limit.
  • The employer does not support another qualified plan to which contributions are made, or benefits accrued, for service in the calendar year. For this purpose, a qualified plan (defined in section 219(g)(5)) includes a qualified pension plan, a profit-sharing plan, a stock bonus plan, a qualified annuity plan, a tax-sheltered annuity plan, or a Simplified Employee Pension (SEP) plan. A qualified plan for employees covered under a collective bargaining agreement for which retirement benefits were the subject of good faith bargaining is disregarded if these employees are excluded from taking part in the SIMPLE IRA plan. 

If the failure to continue to satisfy the 100-employee limit or the one-plan rule described above is due to an acquisition or similar transaction involving the business, special rules apply. Consult your tax advisor to find out if you can still support the plan after the transaction.

Certain related employers (trades or businesses under common control) must be treated as a single employer for purposes of the SIMPLE IRA requirements. These are: 

  1. a controlled group of corporations under section 414(b); 
  2. a partnership or sole proprietorship under common control under section 414(c); or 
  3. an affiliated service group under section 414(m). 
  4. In addition, if you have leased employees required to be treated as your own employees under the rules of section 414(n), then you must count all such leased employees for the requirements listed above.
Can someone work at another business while also taking part in the SIMPLE IRA plan?

Yes, although contributions to the SIMPLE IRA plan cannot be based on the salary from the other business and if the employee is participating in another retirement plan the salary deferral contributions must be combined amongst both plans.

If a business with a SIMPLE IRA closes or is sold, what happens to the plan?

If the business closes, the plan should be terminated and rolled over to an IRA or other plan. 

When does a SIMPLE IRA plan need to be set up?

You can set up a SIMPLE IRA plan effective on any date between January 1st - October 1st for the calendar year the contributions are made, provided you didn’t previously maintain a SIMPLE IRA plan.

What paperwork needs to be completed to set up a SIMPLE IRA Plan?

A 5304-SIMPLE form is used to establish a SIMPLE IRA plan.  Additionally, the plan sponsor will need to complete the Employer Plan Data Request Form, the Form 5304-SIMPLE and all appropriate notices.

What does the employer need to provide to employees as part of the establishment process?

The employer must provide each employee with a copy of the completed Form 5304-SIMPLE and Model Notification to Eligible Employees.   

What does the employee need to provide to participate in the SIMPLE IRA?

Each eligible employee must complete the IRS Model Salary Reduction Agreement, even if they choose not to take part. Additionally, Security Benefit requires employees to complete an account application to set up their account if they will be contributing or receiving Non-elective Employer contributions.


Security Benefit, its affiliates and subsidiaries, and their respective employees and representatives, do not provide tax, accounting, or legal advice. Any statements contained herein concerning taxes were not intended as and should not be construed as tax advice, nor should they be used for the purpose of avoiding federal, state, or local taxes and/or tax penalties. Please seek independent tax, accounting, or legal advice. 

Services are offered through Security Distributors, a subsidiary of Security Benefit Corporation (Security Benefit).

SB-10042-14 | 2023-12-05