Updated October 19, 2026. Quick answer: Form 5305-SIMPLE is the model SIMPLE IRA plan document for an employer that names one designated financial institution to receive all contributions. The form says it is not filed with the IRS and is kept with the employer’s records, and the plan is adopted once the employer and the institution have both signed.
What Form 5305-SIMPLE is for
The instructions describe the form this way: “Form 5305-SIMPLE is a model Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) plan document that an employer may use in combination with SIMPLE IRAs to establish a SIMPLE IRA plan described in section 408(p).”
The page header carries the phrase “Do not file with the Internal Revenue Service”, and the instructions repeat it: “Do not file Form 5305-SIMPLE with the IRS. Instead, keep it with your records.”
On what makes the document operative, the form says “Pages 1 and 2 of Form 5305-SIMPLE contain the operative provisions of your SIMPLE IRA plan.” Pages 3 and up hold the model notice, the model salary reduction agreement and the instructions. For background reading, the IRS publishes the Publication 560 page.
What is different about the designated financial institution version
The title of this form ends with “for Use With a Designated Financial Institution”. That wording is the whole difference from the sibling form. The instructions say this form is the wrong choice if “You want to permit each of your eligible employees to choose a financial institution that will initially receive contributions.” In that case the form points elsewhere: “Instead, use Form 5304-SIMPLE”.
Article V defines the institution: “A designated financial institution is a trustee, custodian, or insurance company (that issues annuity contracts) for the SIMPLE IRA plan that receives all contributions made pursuant to the SIMPLE IRA plan and deposits those contributions to the SIMPLE IRA of each eligible employee.”
That means every contribution goes to the one named institution first, and the institution then places each amount in the account of the employee it belongs to. The form also says you cannot skip the choice: “if you do not want to choose a designated financial institution, you cannot use this form”. The institution is limited to certain types: “Only certain financial institutions, such as banks, savings and loan associations, insured credit unions, insurance companies (that issue annuity contracts), or IRSapproved nonbank trustees may serve as a designated financial institution under a SIMPLE IRA plan.”
The employee’s right to transfer
Because the employer picks the institution, the form builds in an exit. Article IV says “The Employer will not impose any cost or penalty on a participant for the transfer of the participant’s SIMPLE IRA balance to another IRA.” The institution signs a matching promise: “Upon the request of any participant, the undersigned also agrees to transfer the participant’s balance in a SIMPLE IRA established under this SIMPLE IRA plan to another IRA without cost or penalty to the participant.”
The form also bars holding money back: “The Employer may not require the employee to retain any portion of the contributions in his or her SIMPLE IRA or otherwise impose any withdrawal restrictions.” And on ownership, “All contributions made under this SIMPLE IRA plan are fully vested and nonforfeitable.”
Tax treatment of a move depends on where the money goes and when. “a SIMPLE IRA balance may be rolled over or transferred on a taxfree basis to another IRA designed solely to hold funds under a SIMPLE IRA plan”, and a move to any IRA or eligible retirement plan is allowed “after a 2year period has expired since the individual first participated in any SIMPLE IRA plan of the Employer”.
Who receives the contributions and when
All three kinds of money, the employee’s deferrals, the match and the nonelective amount, go to the designated institution. For deferrals, “The Employer will make the salary reduction contributions” to the institution within the deadline shown in the table below. For the employer’s own money, the form says “The Employer will make the matching or nonelective contributions” “no later than the due date for filing the Employer’s tax return, including extensions, for the taxable year that includes the last day of the calendar year for which the contributions are made.”
The instructions add a Department of Labor note: “salary reduction contributions must be made to the SIMPLE IRA at the designated financial institution as of the earliest date on which those contributions can reasonably be segregated from the employer’s general assets, but in no event later than the 30day deadline described previously.”
For the institution’s side, “By completing Article VII, you have agreed to be the designated financial institution for this SIMPLE IRA plan.” “You agree to maintain IRAs on behalf of all individuals receiving contributions under the plan”.
Parts of the form and the printed figures
The plan is laid out in seven articles, and the signature block names both the employer and the designated financial institution.
| Part | As printed on the form |
|---|---|
| Article I | “Employee Eligibility Requirements” |
| Article II | “Salary Reduction Agreements” |
| Article III | “Contributions (complete the blank, if applicable” |
| Article IV | “Other Requirements and Provisions” |
| Article V | “Definitions” (including “Designated Financial Institution”) |
| Article VI | “Procedures for Withdrawals and Transfers” |
| Article VII | “Effective Date” |
The figures below are the ones the form prints in running text. The form flags that some of them are dated: “This is the amount for 2012. For later years, the limit may be increased for costofliving adjustments.”
| Item | As printed on the form |
|---|---|
| Employer size test | “Last calendar year, you had no more than 100 employees” |
| Compensation floor | “who are reasonably expected to receive at least $5,000 in compensation from you during the year” |
| Matching contribution | “This matching contribution cannot exceed 3% of the employee’s compensation.” |
| Lowest reduced match | “You may reduce this 3% limit to a lower percentage, but not lower than 1%.” |
| Nonelective alternative | “make a nonelective contribution equal to 2% of compensation for each eligible employee” |
| Election window | “an eligible employee may make or modify a salary reduction election during the 60day period immediately preceding January 1 of that year” |
| Deposit deadline for deferrals | “no later than 30 days after the end of the month in which the money is withheld from the employee’s pay.” |
| Early withdrawal tax | “this additional tax is increased from 10% to 25%” |
| Notice penalty | “you will be liable for a penalty of $50 per day until the notification is provided” |
Who can use the plan, and what to check
The employer test is two-part. After the size test in the table, the second part reads “You do not maintain during any part of the calendar year another qualified plan with respect to which contributions are made, or benefits are accrued, for service in the calendar year.”
The form lists two more reasons not to use it: “You want employees who are nonresident aliens receiving no earned income from you that is income from sources within the United States to be eligible under this plan”, or “You want to establish a SIMPLE 401(k) plan.”
On reporting, “You are not required to file any annual information returns for your SIMPLE IRA plan”, but employee deferrals still show up elsewhere: “you must report to the IRS which eligible employees are active participants in the SIMPLE IRA plan and the amount of your employees’ salary reduction contributions to the SIMPLE IRA plan on Form W-2.”
On the effective date, “If this is the first year for which you are adopting a SIMPLE IRA plan, you may insert any date between January 1 and October 1, inclusive of the applicable year.” Before choosing between the two model forms, compare it with the retirement plan pages at the IRS SIMPLE IRA plan page.
Which revision applies
The edition read for this page is Form 5305-SIMPLE (Rev. March 2012), which carries its own general instructions and is the revision irs.gov served when it was read on 2026-10-19. Check the revision printed on the form you are adopting, because a later revision can change the limits, the dollar amounts and the model notices. The form itself notes that figures marked as the 2012 amounts can be raised for later years, so confirm the current amounts on irs.gov before relying on any number printed here.
Common mistakes
- Choosing this form when employees are meant to pick their own institution. The form says not to use it if “You want to permit each of your eligible employees to choose a financial institution that will initially receive contributions.”
- Sending the signed form to the IRS. The form says “Do not file Form 5305-SIMPLE with the IRS. Instead, keep it with your records.”
- Skipping the notice before the election window. The form says “You must notify eligible employees prior to the employees’ 60day election period described previously that they can make or change salary reduction elections.” A missed notice carries “a penalty of $50 per day until the notification is provided”
- Running a second plan beside this one. The form says “The Employer will make no contributions to the SIMPLE IRAs other than salary reduction contributions”
Related: SIMPLE IRA contribution limit 2027, Form 5304-SIMPLE, and Form 5305-SEP.
Sources
- Form 5305-SIMPLE (Rev. March 2012), SIMPLE Individual Retirement Account Plan (for Use With a Designated Financial Institution): https://www.irs.gov/pub/irs-pdf/f5305sim.pdf
Read from the agency documents linked above on October 19, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.