SECTION 5. PERMISSIVE

AMENDMENTS FOR NONSIMPLE IRAS

.01 Amendment for all nonSIMPLE IRAs.

(1) Background. An employer’s contribution under a SIMPLE IRA Plan must be deposited into an employee’s SIMPLE IRA. A SIMPLE IRA Plan contribution deposited into a nonSIMPLE IRA could result in adverse tax consequences to the employee. Similar adverse tax consequences could occur if, prior to the expiration of the 2-year period beginning on the date an employee first participated in any SIMPLE IRA Plan maintained by the employee’s employer, the employee rolls over or transfers to a nonSIMPLE IRA funds from the employee’s SIMPLE IRA.

(2) Permissive amendment. A prototype nonSIMPLE IRA may be amended by the prototype sponsor to prohibit the deposits described in section 5.01(1) that could result in adverse tax consequences to an employee. Prototype sponsors and individuals who use this amended nonSIMPLE IRA do not lose reliance on a current opinion letter because of this amendment. Therefore, a prototype sponsor that amends its nonSIMPLE IRA as suggested in this paragraph should not submit the amended nonSIMPLE IRA to the Service for a new opinion letter.

.02 Amendment for spousal non- SIMPLE IRAs.

(1) Background. Section 1427(a) of the SBJPA amended § 219(c) to increase from $250 to $2,000 the maximum deductible amount that can be contributed to nonSIMPLE IRAs established for certain married individuals. This increase applies to an individual’s taxable years that begin after December 31, 1996. (2) Permissive amendment. Section 6.03 of Rev. Proc. 87–50 states that an amendment to an approved IRA solely to facilitate IRA contributions up to the maximum amount deductible under § 219 will not affect the status of the IRA and should not be submitted to the Service. Accordingly, a prototype sponsor that amends a nonSIMPLE IRA solely to reflect the increase in the deductible limit for spousal nonSIMPLE IRAs does not lose reliance on its current favorable opinion letter and should not submit the document to the Service for an opinion letter on the amendment.

type sponsor that amends its nonSIMPLE IRA as suggested in sections 5.01(2) or 5.02(2) must change the corresponding disclosure statement, required pursuant to § 408(i), to reflect the amendment(s) to the nonSIMPLE IRA. The prototype sponsor must distribute the amended disclosure statement to individuals using the amended nonSIMPLE IRA.