An employee must be given the right to enter into an agreement to make salary deferral contributions to his employer’s SIMPLE IRA Plan, or to change an existing salary deferral agreement during the 60-day period immediately preceding January 1 of a calendar year, that is November 2 to December 31 of the preceding calendar year. When making modifications to an existing salary deferral agreement, the employee can either reduce the amount- including reducing the amount to zero, or increase the amount. This 60-day period generally applies to a SIMPLE IRA that is already in existence and is being continued for the next year, but can apply to one that is being established during the current year for the next year.
For a SIMPLE IRA that is being establish in the current year for the current year, the 60-day period includes either the date the employee becomes eligible or the day before that date.
Example:
Company B establishes a SIMPLE IRA Plan effective as of July 1, 2012. Each eligible employee becomes eligible to make salary deferral contributions on July 1, 2012. The e 60-day period must begin no later than May 2, 2012 and cannot end before July 1, 2012.
It is possible that the employer began discussions about the plan on July 1, and therefore would not have been able to provide the notice to the employees before then. In such a case, if the employer provides the summary description to the employees on July 1 and the 60-day period would begin on July 2 and end September 1.
During a year when an employee becomes eligible to participate in the SIMPLE IRA Plan, he must be allowed to start making salary deferral contributions to the plan upon becoming eligible, even if the 60-day period has already ended.
