SECTION 2. BACKGROUND AND

GENERAL INFORMATION

.01 Code § 408(p), added by § 1421(a) of the Small Business Job Protection Act of 1996 (‘‘SBJPA’’), Pub. L. No. 104–188, describes a new type of retirement arrangement, a SIMPLE IRA Plan, which, generally, may be used by small employers who maintain no other qualified plans. Under a SIMPLE IRA Plan, an employer makes contributions to a SIMPLE IRA.

.02 Subsections (a) and (b) of § 408 set forth general requirements for individual retirement accounts and individual retirement annuities, respectively.

.03 Rev. Proc. 87–50, 1987–2 C.B. 647, provides the procedures for a sponsoring organization or a mass submitter (a ‘‘prototype sponsor’’) to apply to the Service for an opinion letter on whether a prototype nonSIMPLE IRA meets the requirements of § 408(a) or (b).

.04 Section 408(p)(1) requires that a SIMPLE IRA established for use with a particular employer’s SIMPLE IRA Plan only accept contributions from that employer pursuant to its SIMPLE IRA Plan or from another employer pursuant to that employer’s SIMPLE IRA Plan. However, a SIMPLE IRA established by or for a particular employee may also accept that employee’s rollovers or

transfers of property from another SIMPLE IRA of that employee.

.05 In 1996, the Service released Forms 5305–S and 5305–SA, model SIMPLE IRAs for use as trust or custodial accounts, respectively. A prototype sponsor that wants to offer Serviceapproved SIMPLE IRAs may (1) use one or both of these model SIMPLE IRAs, (2) use the model amendment procedure contained in section 3, or (3) apply for an opinion letter pursuant to section 4.

.06 In 1996, the Service also released two model SIMPLE IRA Plans, Form 5305–SIMPLE (Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)—for Use With a Designated Financial Institution) and Form 5304–SIMPLE (Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)—Not Subject to the Designated Financial Institution Rules).

.07 Notice 97–6, 1997–2 I.R.B. 26 (January 13, 1997), contains questions and answers relating to the implementation and operation of SIMPLE IRA Plans described in § 408(p), including the election and notice requirements regarding these plans. The Service intends to supplement Notice 97–6 with additional guidance.

.08 Rev. Proc. 97–8, 1997–1 I.R.B. 187 (January 6, 1997), provides guidance to taxpayers for complying with the user-fee program as it pertains to matters under the jurisdiction of the Assistant Commissioner (Employee Plans and Exempt Organizations).