Simple IRA Form 5304 provides clear instructions for opening a retirement account
IRS Simple IRA Form 5304 is used to establish a Simple IRA account.
Employers must complete Simple IRA Form 5304 before you can begin making contributions on behalf of their employees.
Steps to Take Before Employers Can Set Up a Simple IRA
- There are other steps to take before a plan can be established besides completing Simple IRA Form 5304.
- Employers can use the IRS Simple IRA plan template to set up this retirement savings program for employees. Also, employers can use a simple IRA plan that can be offered by banks, insurance companies and other qualified institutions.
- Simple IRA Form 5305 is used if contributions will be deposited with a designated financial institution, such as Fidelity Investments or Franklin Templeton. Simple IRA form 5304 is used if each employee can select their own financial institution to receive the contributions.
- Employers must ensure that all eligible employees receive the necessary information about the Simple IR plan offered by the company. The standard rule is to provide the information each year before the employee election period. This allows the employee sufficient time to review the plan before making the decision to participate. The election period is during the 60 days prior to January 1 of the calendar year.
- The final step for employers is to set up a Simple IRA for all eligible employees as a trust or custodial account. The IRS forms that apply to this step are Form 5305-S or Form 5305-SA, respectively.
The IRS has many forms in addition to the 5304 Simple IRA that employers must use correctly when setting up retirement accounts. Many businesses choose to hire an outside brokerage firm with trained professionals who are more familiar with which form to use and when to use it.
This will reduce the number of costly mistakes employers could make if the wrong form is used or forms are not submitted on time.
Whether a business decides to use an outside firm or its own benefits department, it’s best to make sure the correct procedures are followed. Simple IRA Form 5304 comes with instructions that, if followed correctly, will ensure compliance.