Convert a SIMPLE IRA plan to a SIMPLE IRA Plus plan

ARTICLE TAKEAWAYS

  • The differences between SIMPLE IRA and SIMPLE IRA Plus plans
  • The steps required to convert a SIMPLE IRA plan into a SIMPLE IRA Plus plan

There are several differences between SIMPLE IRA and SIMPLE IRA Plus plans. A SIMPLE IRA Plus plan is a retirement solution that combines 401(k)-style features with the administrative ease of a SIMPLE IRA. Some of the key benefits and features of SIMPLE IRA Plus include:

  • The financial professional serves the plan and provides general education and enrollment guidance to participants
  • Customizable fund menus comprised of American Funds, including the American Funds Target Date Retirement Series®
  • A qualified default investment alternative (QDIA) is available 
     

To compare more plan features, visit Comparing SIMPLE IRA, SIMPLE IRA Plus and SIMPLE 401(k) plans.

Please note the following:

  • When a SIMPLE IRA plan is converted to a SIMPLE IRA Plus plan, it will be effective January 1 of the following year
  • The Internal Revenue Service (IRS) requires the current SIMPLE IRA plan to continue to operate as is for the current calendar year
  • Your dealer firm may have restrictions on the use of the SIMPLE IRA Plus product. Check with your home office if you are unsure if this plan type is approved.
  • There are currently no fees to convert an existing SIMPLE IRA plan to a SIMPLE IRA Plus plan
     

How to convert the plan

Step 1

The plan sponsor must:

  1. Amend and restate their plan by completing the SIMPLE IRA Plus Plan Specifications and the SIMPLE IRA Plus Adoption Agreement located in the SIMPLE IRA Plus Plan Sponsor Guide. You can provide the plan sponsor with the It is easy to set up a SIMPLE IRA Plus plan single sheet for an overview of the enrollment process.
  2. Keep a copy of the adoption agreement and plan specifications for their records
  3. Return the completed forms to American Funds. Copies are acceptable.

Deadline: To ensure the plan sponsor receives the disclosures with sufficient time to notify employees, send these forms to American Funds at least 10 days prior to the start of the plan's enrollment period. 

Plan effective and enrollment dates: The SIMPLE IRA Plus plan will be effective January 1 of the following year. The 60-day enrollment period should begin on November 2.

Step 2

The plan sponsor must communicate the plan changes to the participants prior to the November 2 start of the enrollment period by providing the following forms:
 
  1. SIMPLE IRA Plus Employee Enrollment Guide (which includes the SIMPLE IRA Plus Enrollment/Change form)
  2. SIMPLE IRA Plus Employee Disclosures

a.  Fee and Fund Disclosure*
b.  Notification to Eligible Employees**
c.  Summary Description**

3.    Sample SIMPLE IRA Plus Automatic Contribution Arrangement Notice** (if
       applicable)

*American Funds will complete and email to the plan sponsor prior to the November 2 enrollment period start date.

**The plan sponsor must complete before distributing.

Step 3

Schedule an enrollment meeting prior to the November 2 deadline, then allow a 60-day enrollment period. During the meeting:

  1. Consider using the SIMPLE IRA enrollment video. This video can help employees understand the benefits of the plan and why they should participate.
  2. Provide prospectuses for all of the plan’s investment options
  3. Collect the completed SIMPLE IRA Plus Enrollment/Change forms (located within the guide) and return them to the plan sponsor. Do not return these to American Funds.
  4. Have the plan sponsor use the SIMPLE IRA Plus Enrollment/Change forms to enter the information on the Plan Sponsor website

On January 1, all new contributions will be directed to the SIMPLE IRA Plus accounts.

How to handle existing SIMPLE IRA plan assets

Participants in the SIMPLE IRA plan can choose how to manage their existing accounts. They can:

  • Keep the assets in the original SIMPLE IRA
  • Roll them into a traditional IRA
  • Transfer them to the SIMPLE IRA Plus
     

Review the IRA outgoing transfer and rollover guide for additional information.

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Related content

SIMPLE IRA

SIMPLE IRA Plus

SIMPLE IRAs for small businesses

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The guidelines and procedures provided in the Account Resource Center may not apply to networked accounts or accounts not directly held by American Funds. The guidelines and procedures provided also apply only to those retirement accounts or Coverdell ESAs invested in American Funds with Capital Bank and Trust Company (CB&T) as custodian. The guidelines and procedures provided in the Account Resource Center do not apply to plans held in our retirement plan solutions — PlanPremier, PlanPremier-TPA or RecordkeeperDirect. Information on the Account Resource Center may change periodically, and previously printed information may not be current. Please refer to capitalgroup.com for the most current information available.

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