SIMPLE IRA Plus distributions

Distributions to SIMPLE IRA Plus participants age 59½ or over are considered normal distributions. Refer to SIMPLE IRA Plus tax information for additional information on the potential tax implications to your client if they take a normal distribution.

Generally, distributions to SIMPLE IRA Plus participants under the age of 59½ are considered early distributions. Your client may be subject to an early distribution penalty of 10%. The early withdrawal penalty increases to 25% if the employee has not been participating in the plan for at least two years.

The early distribution penalty does not apply for certain distributions made before age 59½. These exceptions are referred to as 72(t) provisions because they fall under Internal Revenue Code (IRC) Section 72(t). Refer to IRA penalty exceptions for additional information.

Participants under the age of 59½ who wish to claim disability and avoid the IRS early distribution penalty must first complete the IRA Disability Distribution Request to ensure that the transaction is reported to the IRS appropriately. In addition to the form, provide a physician’s statement acknowledging the participant’s condition meets the IRC Section 72(m)(7) definition of “disabled.” The physician’s statement must indicate the date the disability began. Consult a tax advisor for more information.

If a participant is disabled and over age 59½, distributions are reported as normal distributions.

Yes, the IRS requires SIMPLE IRA Plus participants to withdraw a minimum amount from their accounts annually starting the year they reach age 73, even if they are still making and receiving contributions. Failure to withdraw an RMD may result in IRS penalties. Review the Required Minimum Distribution (RMD) Guide for additional information and resources.

Note: RMDs are not required from Roth assets during the employee's lifetime.