SIMPLE IRA Annual Notice: 60-Day Election Window and Required Content

Employers sponsoring a SIMPLE IRA must give every eligible employee a written notice each year before the 60-day election period opens on November 2, and the annual notice requirements for a SIMPLE IRA are set by the IRS: the notice has to spell out the employee’s right to start, change, or stop salary reduction contributions, state the employer’s contribution formula for the coming year, address financial institution selection, and include a summary description prepared by the plan’s financial institution.¹ Miss the deadline or leave a required piece out, and the plan’s tax-favored status is on the line.

The Four Things the Notice Must Cover

Section 408(l)(2)(C) of the Internal Revenue Code requires the employer to notify each eligible employee of the chance to make or change a salary reduction election before the election period begins.² The IRS breaks that requirement into four practical pieces:

A written explanation of the employee’s election rights: starting salary reduction contributions, changing the current amount, or stopping contributions altogether.
The employer contribution formula for the coming year, whether that is a dollar-for-dollar match up to 3% of compensation or a flat 2% nonelective contribution for all eligible employees, including the specific percentage the employer will use.³
Whether employees choose their own IRA provider or must use one the employer designates, and if designated, the name of that institution.
The summary description prepared by the financial institution, covering eligibility requirements, plan mechanics, how and when to make elections, and the rules and consequences of withdrawals and rollovers.²

Employers use IRS Form 5304-SIMPLE when employees choose their own financial institution and Form 5305-SIMPLE when the employer designates a single institution for everyone.¹ Those forms also serve as the plan document, so accuracy matters for plan establishment as well as annual disclosure.

Disclosing a Reduced Match

Matching employers can lower the match from 3% to as low as 1% of compensation, but only for two calendar years within any rolling five-year period.¹ When the employer plans to use a reduced match, the annual notice must disclose the lower percentage within a reasonable time before the election period opens. Failing to flag a reduced match ahead of the election window is one of the more common compliance mistakes the IRS calls out.

Which Employees Have to Get It

The notice goes to every employee who meets the plan’s eligibility threshold. The default rule qualifies an employee who earned at least $5,000 from the employer during any two preceding calendar years and is reasonably expected to earn at least $5,000 in the current year.⁴ Employers can loosen that standard to let more workers in, but they cannot tighten it.

Two categories may be excluded: employees covered by a collective bargaining agreement whose retirement benefits were negotiated through that agreement, and nonresident aliens who receive no U.S.-source compensation from the employer.¹ Everyone else who hits the compensation threshold gets the notice, even employees who have never contributed a dollar.

When to Send It: The 60-Day Election Window

The annual election period runs from November 2 through December 31, a 60-day window for employees to make salary reduction decisions for the upcoming year.¹ The notice has to reach eligible employees before that window opens so they have time to review the plan and decide what to do.

Two situations shift the calendar. When a business sets up a new SIMPLE IRA mid-year, the 60-day election period must include the date the plan becomes effective. When an employee first becomes eligible after the plan year has already started, the 60-day window must include the day that employee becomes eligible.¹ For a plan with no waiting period, that typically puts the notice on the employee’s hire date.

Keep proof of delivery. A signed acknowledgment, a return email receipt, or a timestamp from a benefits platform all work as evidence the notice went out on time. Employers who deliver electronically should give participants the ability to receive plan documents on paper and to opt out of electronic delivery. Whatever the method, the documentation belongs in the plan’s records for audit purposes.

What Employees Can Do During the Window

During the 60 days, each eligible employee can sign or update a Salary Reduction Agreement to start contributing, change the dollar amount or percentage withheld from each paycheck, or opt out of salary deferrals entirely. Opting out does not forfeit any nonelective contribution the employer has committed to make.

The Salary Reduction Agreement must state the specific amount withheld, subject to annual IRS limits.² Elections generally lock in for the full calendar year, though many plans allow mid-year termination of a salary reduction agreement, with reinstatement waiting until the next election period. The plan document controls this point, so the notice or accompanying materials should make it clear.

From the employer’s side, the notice is binding. An employer cannot suspend or modify the matching contributions it promised in the notice, and it cannot terminate the plan before the calendar year ends.⁴ Whatever contribution formula appeared in the annual notice sticks for the entire year.

2026 Numbers the Notice Has to Get Right

For 2026, the standard salary reduction limit is $17,000. Employees aged 50 through 59, and those 64 and older, can defer an additional $4,000 in catch-up contributions, for a total of $21,000.⁵ A higher catch-up limit of $5,250 applies to employees who turn 60, 61, 62, or 63 during the year, bringing their maximum deferral to $22,250.⁶

SECURE 2.0 layered on another set of numbers that depend on employer size:

Employers with 25 or fewer employees see the salary deferral limit automatically increase by 10% to $18,100, with the standard catch-up limit rising to $3,850.¹
Employers with 26 to 100 employees can opt into the same higher limits, but only by committing to a 4% matching contribution or a 3% nonelective contribution for the year.¹

Employers using the enhanced SECURE 2.0 limits need to reflect those numbers correctly in the annual notice. Telling employees the wrong deferral ceiling creates a compliance problem. If an employee also participates in another employer’s retirement plan during the same year, total salary reduction contributions across all plans cannot exceed $24,500 in 2026.⁵

Fixing a Missed or Incomplete Notice

If the annual notice goes out late, never goes out, or leaves something required out of it, the plan has a compliance defect. The IRS SIMPLE IRA Plan Fix-It Guide walks employers through correction: determine whether the notice was timely, evaluate the impact on employees, make a reasonable correction, and put procedures in place so the mistake does not repeat.⁷ A reasonable correction often means giving employees a retroactive chance to make or change a salary reduction election and making any employer contributions that would have been owed had the notice been timely.

The IRS has historically worked with employers who self-correct in good faith, especially small businesses that catch the error early. Ignoring the problem is a different matter. Repeated failures to provide the required notifications can cost the plan its tax-favored status, which turns employee deferrals immediately taxable and wipes out employer deductions.³ For a plan built specifically to offer a low-cost, low-hassle retirement benefit, letting the notice deadline slip is an unforced error that can undo the entire arrangement.

1
Internal Revenue Service. SIMPLE IRA Plan
2
Office of the Law Revision Counsel. 26 U.S. Code 408 – Individual Retirement Accounts
3
Internal Revenue Service. Annual SIMPLE IRA Plan Notification Requirements Weren’t Followed
4
Internal Revenue Service. Retirement Plans FAQs Regarding SIMPLE IRA Plans
5
Internal Revenue Service. Retirement Topics – SIMPLE IRA Contribution Limits
6
Internal Revenue Service. Notice 2025-67
7
Internal Revenue Service. SIMPLE IRA Plan Fix-It Guide