VIA FAX
April 22, 1997
TO: PENSION COMMITTEE No. 9-97
PENSION OPERATIONS ADVISORY COMMITTEE No. 10-97
AD HOC COMMITTEE ON SIMPLE PLANS
RE: REQUEST FOR INFORMATION RE: SIMPLE PLANS AND
UNINCORPORATED ENTITIES
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The Internal Revenue Service is preparing additional guidance on SIMPLE plans.
Although guidance likely will not issue for several months, the Institute will be communicating
issues of concern to our members to the Service and the Treasury Department. The most
prominent issue of interest to our membership is the treatment of sole proprietors, partners
and self-employed individuals with regard to the SIMPLE matching contribution formula.
It is our understanding that IRS and Treasury are internally discussing whether prior
rulings regarding unincorporated entities in 401(k) plan regulations is relevant, by analogy, to
SIMPLE IRAs. Specifically, Section 1.401(k)-1(a)(6)(iii) of the IRS regulations treats matching
contributions as "elective contributions made on behalf of the partner." We have informally
expressed our concern that such a ruling regarding SIMPLE IRAs would (1) limit the extension
of SIMPLE retirement plan coverage, because many small employers are unincorporated
entities and (2) require transitional correction rules, because many such entities that have
established SIMPLE IRAs may not currently be applying this rule to SIMPLE matching
contributions.
To assist the IRS and Treasury in clarifying the issue, we would like to submit a letter
detailing the extent to which SIMPLE plans are being established by unincorporated entities. It
is our belief that such entities constitute a substantial segment of the SIMPLE market, and we
seek your assistance in assembling data to support that representation. Additionally, the
Institute is interested in obtaining other data to gauge how the SIMPLE has fared during the
first quarter of 1997. Based on data available to you as of March 31, 1997, please complete the
attached brief questionnaire and fax it to the undersigned by May 9, 1997.
Russell G. Galer
Assistant Counsel - Pension
Enclosure