How to open a SIMPLE IRA 

How to open a SIMPLE IRA

A SIMPLE IRA is a retirement plan for small businesses with up to 100 employees. Two account types—a group plan (employer funding account) and a participant account—work together to form a SIMPLE IRA. The employer must establish a group plan before opening employee participant accounts.

You can open a Simple IRA using DocuSign® or paper forms.

All accounts
  • Your firm name, master account number, and contact information.
  • If the trustee or participant is affiliated with a member firm of an exchange or FINRA and Rule 3210 applies, a FINRA Rule 3210 Consent Letter.
  • Adobe® Reader® or Adobe Acrobat® 7.0 or higher (download the latest version on the Adobe website).
  • A completed IRA Account Application (use the application instructions for more information).
    • Information for the account holder (employer or participant), including name, known by name, home and business addresses (no P.O. boxes or advisor addresses), mailing address (if different from home or business address), home or business phone number, birth date, country of legal residence, all countries of citizenship, identification number Tooltip , employment status, employer name.
    • Information for the beneficiary(ies) (recommended).
    • Business and employer information is not required if the client is retired or non-employed.
In addition to the information above, the following account specific information may be required:
Group accounts
Participant accountsA completed SIMPLE IRA Participant Notice and Summary Description (distributed to employees by the employer)
Additional features

For additional features requested by the client:

Account opening method

If using DocuSign to submit forms:

  • For existing Schwab clients, a complete Schwab Advisor Center® profile with the account holder's current email address and mobile phone number.
  • For new-to-Schwab clients, the email address and mobile phone number.
  • All clients must use text message (SMS) authentication and Knowledge Based Authentication (KBA) for DocuSign.

For details, see How to use DocuSign. Use the applicable form(s) for your situation.

  • To open a group SIMPLE IRA plan, select the SIMPLE IRA Basic Plan Document. Print the document and provide to the employer; this document governs the plan. Advise the employer to review the document and keep for future reference. 
  • To open a participant SIMPLE IRA, select SIMPLE IRA Participant Notice and Summary Description. Print the document and provide to the employer. Advise the employer to complete the form and distribute to eligible employees. This form does not need to be returned to Schwab.

This process may be used to open a group SIMPLE IRA using paper forms.

  1. Select the SIMPLE IRA Basic Plan Document from the Forms library on Schwab Advisor Center. Click Select and select Open PDF. Print the document and provide to the employer; this document governs the plan. Advise the employer to review the document and keep for future reference.
  2. Select the Open Account – SIMPLE IRA Account from the Forms library on Schwab Advisor Center.
  3. Expand the list to view the forms. Click Select, and select Open PDF for each of the following forms as well as any other applicable forms:
     
  4. Complete all necessary fields and ensure all additional features the client requests are added. 
  5. Print the form(s) and obtain signatures from each account holder. Send the signed form(s) to your Schwab service team via a Schwab Advisor Center service request
  6. After the group plan is established, usually within 24 hours, the employer and employees may enroll themselves in the plan.

This process may be used to open a participant SIMPLE IRA using paper forms.

  1. Select the SIMPLE IRA Participant Notice and Summary Description from the Forms library on Schwab Advisor Center. Click Select and choose the appropriate option for opening the form. Advise the employer to complete the form and distribute to eligible employees. This form does not need to be returned to Schwab.
  2. Select the Open Account – SIMPLE IRA Account from the Forms library on Schwab Advisor Center. 
  3. Expand the list to view the forms. Click Select and select Open PDF for the IRA Account Application as well as other applicable forms.
  4. Complete all necessary fields and ensure all additional features the client requests are added.
  5. Print the form(s) and obtain signatures from each account holder or participant. Send the signed form(s) to your Schwab service team via a Schwab Advisor Center service request.

Once you submit your request:

  • If the forms were submitted using DocuSign, review the What's next? section of How to use DocuSign.
  • Once the group plan is established, usually within 24 hours, the employer and employees may enroll themselves in the plan.
  • Once the employer SIMPLE-IRA plan is established, your client can add additional participants if needed.
  • Once clients establish a SIMPLE IRA plan and participants enroll, they may begin making contributions. To fund the plan, they must print and complete a SIMPLE IRA Contribution Transmittal Form. The form can be mailed in with a check or scanned in with ACH (MoneyLink) instructions.
  • Participants can also elect to change their contribution amount each year using the SIMPLE IRA Elective Deferral Agreement. Participants should keep this form for their records. This form is not returned to Schwab.
  • If any paperwork authorizing an advisor to manage an account is incomplete or missing, Schwab will temporarily set up the account with a special Schwab Advisor Services master account but not a firm's master account. Advisors have 90 days to provide missing paperwork or signatures. After 90 days, the account is no longer considered a Schwab Advisor Services account and will be transferred to the Individual Investor Division.
  • The account holder should consult with their tax advisor if they have any questions about tax implications.
  • Schwab will send your client standard communications about their SIMPLE IRA once it's opened.
  • If you have questions about opening SIMPLE IRAs, call your service team.

To select a form, go to the Forms library on Schwab Advisor Center.

Form: IRA Account Application
Form: Options Trading and Margin Application
Form: Power of Attorney (Individual POA)
Form: SIMPLE IRA Adoption Agreement
Form: SIMPLE IRA Contribution Transmittal Form
Form: SIMPLE IRA Elective Deferral Agreement
Form: SIMPLE IRA Employer's Agreement with Schwab
Form: SIMPLE IRA Participant Notice and Summary Description
Resource: irs.gov

Who is a SIMPLE IRA for?
A SIMPLE IRA may be appropriate for businesses with 100 or fewer employees seeking a low-cost plan that's easy to administer and maintain. Companies maintaining another employer-sponsored retirement plan in the same year are not eligible.

How is a SIMPLE IRA funded?
The plan is funded with contributions deducted from employees' salaries, as well as annual employer contributions. Each eligible employee can decide to participate and how much to contribute, but employer contributions are mandatory.

What are the SIMPLE IRA tax advantages?
An employer can generally deduct any contributions made on behalf of plan participants from business expenses. Any earnings within the participant accounts will grow tax-deferred until withdrawn.

What does my client need to know about administering a SIMPLE IRA?

  • SIMPLE IRAs are easy to set up and maintain. IRS filing, tax reporting, and compliance testing are not required.
  • Schwab reports all contributions and end-of-year fair market value on Form 5498 by May 31 each year.
  • Full vesting is immediate.

What additional features are available for SIMPLE IRA plans?
Your client's SIMPLE IRA plan is eligible for the following additional features:

  • Withdrawal power financial advisor (WPFA), Withdrawal power financial advisor-custody (WPFA-C), full power of attorney, or limited power of attorney
  • Covered and long options Tooltip  strategies only
  • Schwab ACH (MoneyLink) for master accounts (contributions only)
  • Schwab ACH (MoneyLink) for participant accounts (distributions only)

When should my client establish a SIMPLE IRA?
Clients can establish a SIMPLE IRA plan for a current year by October 1. The plan must be operated on a calendar year basis, meaning the plan's first year may be less than 12 months. Employers must give employees 60 days' notice about the plan before salary deferrals begin.

Are SIMPLE IRAs governed by ERISA?
Yes. They are subject to ERISA regulations.

How to add features to an account
How to add a power of attorney to an account
How to establish a Schwab MoneyLink® profile
How to use DocuSign®
Introduction to householding
Introduction to options trading
Introduction to SIMPLE IRAs