Printable Form 2026

IRS Form 5305-SIMPLE – IRS Form, Instructions, Pubs 2026

IRS Form 5305-SIMPLE – Small business owners seeking an easy, low-cost way to offer retirement benefits often turn to the SIMPLE IRA plan. The official IRS model document for plans requiring all contributions to flow through one employer-chosen financial institution is IRS Form 5305-SIMPLE (Savings Incentive Match Plan for Employees of Small Employers — for Use With a Designated Financial Institution).

This article explains exactly what Form 5305-SIMPLE is, who should use it, how to set it up correctly, current 2025–2026 contribution limits, eligibility rules, and step-by-step instructions — all based on the latest official IRS guidance (including Publication 560 for 2024 returns, Notice 2025-67 for 2026 COLAs, and the March 2012 revision of the form, which remains the current model as of February 2026).

Download the official form here: IRS Form 5305-SIMPLE PDF

What Is IRS Form 5305-SIMPLE and When Should You Use It?

Form 5305-SIMPLE is a model plan document under IRC Section 408(p) that lets eligible small employers establish a SIMPLE IRA plan. Employers use it together with individual SIMPLE IRAs (Forms 5305-S or 5305-SA) for each employee.

Key distinction from Form 5304-SIMPLE:

  • Use Form 5305-SIMPLE if you (the employer) designate one financial institution (bank, credit union, brokerage, insurance company, etc.) to receive all initial contributions.
  • Use Form 5304-SIMPLE if employees may choose their own financial institutions.

The designated institution must agree to accept all plan contributions and allow participants to transfer or roll over their balances to another SIMPLE IRA (or traditional IRA after the 2-year period) without cost or penalty.

Do not file Form 5305-SIMPLE with the IRS — keep the signed original in your records. It also serves as the required summary description and contains model employee notification and salary reduction agreement forms.

Who Is Eligible to Establish a SIMPLE IRA Plan?

Employer eligibility (2026 rules):

  • No more than 100 employees who earned at least $5,000 in compensation in the preceding year (includes self-employed owners and leased employees under section 414(n)).
  • You currently maintain no other qualified retirement plan (with limited exceptions for collectively bargained employees).
  • Grace period: If you grow beyond 100 employees, you may continue the plan for two more years.

Employee eligibility (you may use less restrictive rules but not more):

  • Earned at least $5,000 in any two preceding years and expected to earn at least $5,000 in the current year.
  • Excludable: Union employees with bargained retirement benefits; nonresident aliens with no U.S.-source compensation from you.

All eligible employees must participate if they choose to defer (or receive the employer contribution).

2025 & 2026 SIMPLE IRA Contribution Limits (IRS Official)

Employee salary reduction (elective deferral) limits:

  • 2025: $16,500 (standard); up to $17,600 for employers with 25 or fewer employees (SECURE 2.0 higher limit)
  • 2026: $17,000 (standard); up to $18,100 for employers with 25 or fewer employees

Catch-up contributions (age 50 or older by year-end):

  • 2025 & 2026: Additional $3,500 (standard)
  • Ages 60–63 (super catch-up under SECURE 2.0): Additional $5,250

Employer contributions (mandatory — you must choose one option annually):

  1. Matching: Dollar-for-dollar match on employee deferrals up to 3% of compensation (can reduce to as low as 1% in no more than 2 out of any 5 years, with proper notice).
  2. Nonelective: 2% of compensation for every eligible employee (even non-deferring), on compensation up to the annual limit ($350,000 for 2025; subject to COLA for 2026).

Additional nonelective contributions (SECURE 2.0, post-2023): Up to 10% of compensation or $5,300 (2026), uniform for all eligible employees.

Important notes:

  • Employee deferrals are subject to Social Security, Medicare, and FUTA taxes.
  • Total contributions are fully deductible by the employer.
  • No discrimination testing or top-heavy rules apply.

Step-by-Step: How to Set Up a SIMPLE IRA Plan Using Form 5305-SIMPLE?

  1. Choose your designated financial institution — Confirm it will serve as trustee/custodian and accept all contributions.
  2. Complete and sign Form 5305-SIMPLE (Rev. March 2012):
    • Fill in employer name, effective date, eligibility rules, and contribution election (matching or nonelective).
    • Obtain signature from the designated financial institution (if required by the form).
  3. Set up a SIMPLE IRA for every eligible employee — Use IRS Form 5305-S (trust) or 5305-SA (custodial) before the first contribution is due.
  4. Provide required notifications (at least 60 days before the election period, typically Nov 2–Dec 31):
    • Copy of completed Form 5305-SIMPLE (satisfies summary description requirement).
    • Details of employer contribution choice.
    • Opportunity to make or change salary reduction elections.
    • Transfer/rollover rights (no cost/penalty from the designated institution).
  5. Collect signed salary reduction agreements from participating employees.
  6. Deposit contributions on time:
    • Employee deferrals: Within 30 days after the month they would have been paid.
    • Employer contributions: By your tax return due date (including extensions).

The plan operates on a calendar-year basis. New plans can generally be effective any date from January 1 through October 1 (or as soon as feasible for brand-new employers after October 1).

Advantages of Using Form 5305-SIMPLE

  • Extremely simple and inexpensive to administer.
  • No annual Form 5500 filing.
  • Employees get immediate 100% vesting.
  • Employer gets full tax deduction.
  • Employees can choose investments within the designated institution’s options.

Common Pitfalls to Avoid (Per IRS SIMPLE IRA Fix-It Guide)

  • Failing to notify employees 60 days before the election period ($50/day penalty unless reasonable cause).
  • Using an outdated plan document (the March 2012 version is still current; no new revision required if you followed prior instructions).
  • Missing employer contributions or depositing late.
  • Allowing contributions to Roth IRAs (SIMPLE contributions go to traditional SIMPLE IRAs; Roth SIMPLE IRAs have separate rules post-SECURE 2.0).

Frequently Asked Questions

Can I change from Form 5305-SIMPLE to 5304-SIMPLE later?
Generally no — once established with a designated institution, switching requires careful planning and possible plan amendment.

Do employees have to contribute?
No, but the employer must still make the chosen matching or nonelective contribution for eligible employees.

What happens if an employee wants to move their money?
After the first 2 years of participation, they can roll over to any traditional or Roth IRA without the 25% early-withdrawal penalty that applies in the first 2 years.

Is Form 5305-SIMPLE still valid in 2026?
Yes. The IRS continues to provide and reference the March 2012 revision on its website. Always check IRS.gov before year-end to confirm no updates are required.

Ready to Set Up Your SIMPLE IRA Plan?

Form 5305-SIMPLE remains one of the easiest IRS-approved ways for small employers (under 100 employees) to offer valuable retirement benefits with minimal paperwork and cost.

Next steps:

  1. Download Form 5305-SIMPLE.
  2. Contact your preferred financial institution to confirm they will act as the designated trustee.
  3. Complete the form and notify employees before the next election period.

For the most current contribution limits, notification templates, and guidance, visit the official IRS pages:

Consult your tax advisor or financial institution for your specific situation. Setting up a SIMPLE IRA with Form 5305-SIMPLE is straightforward, tax-advantaged, and employee-friendly — a win-win for small businesses in 2026 and beyond.