December 24, 1996
TO: PENSION COMMITTEE No. 50-96
PENSION OPERATIONS COMMITTEE
RE: IRS RELEASES SIMPLE IRA GUIDANCE
______________________________________________________________________________
The Internal Revenue Service today released Notice 97-6, attached, which provides
comprehensive guidance on SIMPLE IRAs. The guidance, in question and answer format, addresses
many previously unresolved issues including the application of the "cost or penalty" clause in Code
section 408(p)(7) and the nature of a "designated financial institution’s" duties. See Section J of the
Notice. The guidance includes information on the types of investment products that may be offered in a
SIMPLE plan using a designated financial institution, the required frequency of transfers from the
designated financial institution to another institution selected by a SIMPLE participant, and the annual
fees that may be imposed on SIMPLE accounts. See Section J. The guidance also addresses information
reporting requirements imposed upon SIMPLE IRA trustees. See Section H. Additionally, the Notice
explains how the previously issued Form 5305-SIMPLE may be modified for use by employers that are
establishing a SIMPLE plan, but not using a "designated financial institution." See Section K.
We will keep you informed of developments.
Russell G. Galer
Assistant Counsel - Pension
Attachment