How to Fill Out Form 5304-SIMPLE: Eligibility and Contributions

Form 5304-SIMPLE is the IRS model document you complete to establish a SIMPLE IRA plan when each employee will pick their own financial institution for their account. To fill out Form 5304-SIMPLE, enter your business’s identifying information at the top, work through the four numbered articles (eligibility, salary reduction agreements, employer contributions, and other provisions), sign and date the form, and keep the signed original in your records. It is never mailed to the IRS.¹

If instead you want every participant’s account held at one designated institution, use Form 5305-SIMPLE. The 5304 version gives employees the freedom to choose, and gives you less control over where contributions go.

Confirm You Can Use the Form

Only an “eligible employer” can adopt a SIMPLE IRA. Under Internal Revenue Code Section 408(p), that means a business with no more than 100 employees who each earned at least $5,000 in the prior calendar year.² Count workers across your entire controlled group. If you or family members hold a controlling interest in another business, its employees count toward the 100-person cap.³

You cannot maintain any other qualified retirement plan (a 401(k), SEP, or 403(b)) covering the same employees during the same calendar year. Violating this “exclusive plan” requirement disqualifies the SIMPLE IRA.

Sole proprietors qualify too. Your “compensation” is your net earnings from self-employment from Schedule SE, calculated before subtracting your own SIMPLE IRA contribution.⁴

Timing

For a brand-new plan, the effective date can be any day from January 1 through October 1 of the current year, provided neither you nor a predecessor employer has previously maintained a SIMPLE IRA. A business formed after October 1 can adopt the plan as soon as administratively feasible. If you previously ran a SIMPLE IRA and want to restart, the effective date must be January 1.⁵

Working Through the Form

Download the current revision from irs.gov before you start.⁶ The form has a header for employer information and four numbered articles.

Employer Information

At the top, enter your business’s legal name, address, and Employer Identification Number.

Article I: Employee Eligibility Requirements

This article defines who can participate. You have two options:

Full eligibility for all employees, with no compensation floor.
Limited eligibility with a minimum compensation threshold, which cannot exceed $5,000. You can also require that an employee earned at least $5,000 in any two preceding years.

You may exclude employees covered by a collective bargaining agreement where retirement benefits were the subject of good-faith bargaining, and nonresident aliens with no U.S.-source income.⁶ Check the boxes that reflect your choices.

Article II: Salary Reduction Agreements

Article II sets the rules for how employees elect their deferral amounts. Each eligible employee completes a separate Salary Reduction Agreement (included in the form package) specifying the percentage of pay they want deferred. The article also establishes the 60-day election period before January 1 when employees can start, stop, or change their deferrals.⁶

Article III: Contributions

This is the most consequential choice on the form. Pick one of two employer contribution formulas:

Matching contributions of each participating employee’s deferrals dollar for dollar, up to 3 percent of that employee’s compensation. You can reduce the match to as low as 1 percent, but only in two out of any five-year period.¹
Nonelective contributions of 2 percent of each eligible employee’s compensation regardless of whether the employee defers. The compensation used for this calculation is capped at the annual limit, $360,000 for 2026.

Your choice applies for the full calendar year and must be communicated to employees before the election period. If you go with the nonelective formula, every eligible employee gets a contribution even if they defer nothing themselves.

Article IV: Other Requirements and Provisions

Article IV confirms that each employee selects their own IRA trustee, custodian, or issuer, which is the defining feature of Form 5304-SIMPLE. Enter the plan’s effective date here. Once every blank is filled and you have signed, the plan is adopted. Keep the signed original.¹

Distribute the Employee Paperwork

Before the annual election period, give every eligible employee three documents:

The Model Notification on page 3 of the Form 5304-SIMPLE package, a fill-in-the-blank notice explaining the plan, the contribution formula you chose, and the election period dates.⁷
The Salary Reduction Agreement for setting or changing the deferral percentage.
A summary description from the financial institution explaining the IRA’s terms, fees, and investment options.

The election period must be at least 60 days. For an established plan it runs November 2 through December 31 each year.⁷ For a new plan or a newly eligible employee, the 60-day window begins before the person is first allowed to participate. Failing to provide the required notices carries a penalty of $50 for each day the failure continues.⁸

Electronic delivery is permitted under 26 CFR § 1.401(a)-21 when the recipient can effectively access the documents. For employees who do not routinely use a computer for their job, you generally need affirmative written consent before switching to email.

2026 Limits You’ll Reference on the Notice

Employee salary deferrals to a SIMPLE IRA are capped at $17,000 for 2026.⁹ Participants age 50 or older can make an additional catch-up contribution of $4,000. A higher catch-up of $5,250 applies to employees who are 60, 61, 62, or 63 during the year.

If an employee also participates in another employer plan, the combined salary reduction contributions across all plans cannot exceed $24,500 for 2026.⁹

Under SECURE 2.0, employers with 25 or fewer employees who received at least $5,000 in compensation automatically qualify for higher deferral limits equal to 110 percent of the standard amounts.¹⁰ For 2026 that is a deferral limit of $18,100. Employers with 26 to 100 employees can elect to use the increased limits, but doing so raises the required employer contribution: the match becomes 4 percent (instead of 3 percent), or the nonelective contribution becomes 3 percent (instead of 2 percent).

Employers may also make an additional nonelective contribution in a uniform manner to each eligible employee, up to the lesser of 10 percent of compensation or $5,000 per employee.² This sits on top of the Article III contribution.

Beginning in 2026, you can also offer a Roth (after-tax) contribution option within the plan. It is optional. If you offer it, the plan documents and employee notifications should describe how the Roth election works alongside the traditional pre-tax deferral.

Deposit Deadlines Once the Plan Is Running

Employee salary deferrals must be deposited as soon as they can reasonably be separated from your general business assets, and no later than 30 days after the end of the month in which the money was withheld.¹¹ For plans with fewer than 100 participants, depositing within 7 business days of withholding satisfies a Department of Labor safe harbor.¹²

Your matching or nonelective contributions must be deposited by the due date of your business’s federal income tax return, including extensions.⁵

Keep the Signed Form

Because Form 5304-SIMPLE never gets filed with the IRS, your own records are the only proof the plan was properly adopted. Store the signed original with copies of every annual employee notification, Salary Reduction Agreement, and summary description you distribute. These records must be available for inspection during an audit.

Once established, the plan must run for the full calendar year. You cannot terminate it mid-year, and you must fund all contributions promised in the employee notice for the entire year.¹ To discontinue the plan for the following year, notify employees within a reasonable time before November 2, and inform your financial institution and payroll provider.

1
Internal Revenue Service. SIMPLE IRA Plan
2
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
3
Internal Revenue Service. SIMPLE IRA Plan Fix-It Guide – You Have More Than 100 Employees
4
Internal Revenue Service. SIMPLE IRA Tips for the Sole Proprietor
5
Internal Revenue Service. Retirement Plans FAQs Regarding SIMPLE IRA Plans
6
Internal Revenue Service. IRS Form 5304-SIMPLE
7
U.S. Department of Labor. SIMPLE IRA Plans for Small Businesses
8
Office of the Law Revision Counsel. 26 U.S. Code 6693 – Failure to Provide Reports on Certain Tax-Favored Accounts or Annuities
9
Internal Revenue Service. Retirement Topics – SIMPLE IRA Contribution Limits
10
Internal Revenue Service. Miscellaneous Changes Under the SECURE 2.0 Act of 2022
11
Internal Revenue Service. SIMPLE IRA Plan Fix-It Guide – You Didn’t Deposit Employee Elective Deferrals Timely
12
Internal Revenue Service. Retirement Topics – Contributions