Form 5305‑S – SIMPLE IRA: 2026 Limits, Rules, and Setup

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Plenty of teams treat the plan and the account as one step, and that single assumption sets up hours of review loops. The employer adopts the SIMPLE IRA plan with Form 5304-SIMPLE or 5305-SIMPLE. Each participant then opens the account itself, and that is where Form 5305-S comes in: it is the trust account agreement, signed by the trustee and participant, retained in the records, never filed with the IRS.

The numbers that belong in your 2026 client communications are not the ones printed on the April 2017 form. The deferral limit is 17,000, the standard catch-up is 4,000, and certain applicable SIMPLEs run a higher 18,100. Two account-level rules deserve their own line in the file: a distribution inside the first two years can trigger an additional 25% tax, and required minimum distributions now begin at age 73 even though the form text still says 70½.

Key Takeaways

• Use Form 5305‑S to open an individual SIMPLE IRA trust account with a trustee, or Form 5305‑SA to open a custodial account, after the employer has adopted a SIMPLE IRA plan. You do not file these with the IRS, you retain them.
• Employers establish the plan with Form 5304‑SIMPLE or 5305‑SIMPLE. These plan forms include the required employee notice and salary reduction agreement templates.
• 2026 SIMPLE IRA deferral limit is set at 17,000, standard catch‑up at 4,000, and certain “applicable SIMPLEs” have a higher 18,100 limit. Confirm which rules your client qualifies for.
• The 2‑year rule matters. Distributions in the first two years can trigger an additional 25% tax, and rollovers are restricted during that window.
• RMDs start at age 73 under current law, even though the IRS model forms still reference 70½. Operate under the current rules and keep the signed form on file.
• Always download forms from IRS.gov and open them in Adobe Acrobat Reader to avoid broken fields and missing text.

What Form 5305‑S is, and who actually uses it

• What it is: Form 5305‑S is the IRS model trust account agreement to open a SIMPLE IRA for an individual at a trustee (the trustee must be a bank or savings and loan association under IRC 408(n), or a non-bank entity with explicit IRS approval to serve under Treas. Reg. 1.408-2(e)). Form 5305‑SA is the equivalent for a custodial account. Financial institutions may also use their own documents. Keep the executed form with plan records, do not send it to the IRS.
• Who uses it: Employers that already adopted a SIMPLE IRA plan direct each eligible employee to open a SIMPLE IRA account. The employee and trustee or custodian execute 5305‑S or 5305‑SA to establish that account.

If your team is rushing during onboarding, post one short note in the workpapers: “Plan adopted on [date] via 5304‑SIMPLE or 5305‑SIMPLE. Each participant must open a SIMPLE IRA with 5305‑S or 5305‑SA.” That one line prevents most last‑minute chases.

Which form do you really need?

The quick comparison

Form	What it does	Who signs it	When used
5304‑SIMPLE	Employer adopts SIMPLE IRA, employees pick their own financial institution	Employer	Plan setup when employees choose their own IRA providers
5305‑SIMPLE	Employer adopts SIMPLE IRA with a designated financial institution	Employer	Plan setup when the employer designates the IRA provider
5305‑S	Opens an individual SIMPLE IRA trust account	Participant and trustee	After plan adoption, to establish each employee’s SIMPLE IRA
5305‑SA	Opens an individual SIMPLE IRA custodial account	Participant and custodian	After plan adoption, to establish each employee’s SIMPLE IRA

Source documents, including the model notices and salary reduction agreement, are embedded in the SIMPLE plan forms, not the account forms.

2026 limits you must build into client communications

For the 2026 plan year, the SIMPLE IRA salary reduction limit is 17,000. The standard age‑50 catch‑up is 4,000. SECURE 2.0 also created “applicable SIMPLE” increases, and the IRS set that higher deferral limit at 18,100 for 2026. Confirm whether your client’s plan qualifies for the higher amounts, since employer size and contribution design drive eligibility. Keep the IRS notice with your workpapers.

Employer contributions

Employers must make either a 3% match on compensation or a 2% nonelective contribution for each eligible employee, consistent with the SIMPLE plan document. That rule lives in the plan forms and Publication 560, which you should include in the client’s setup folder.

One area that trips up reviewers

The current IRS 5305‑S and 5305‑SA PDFs show a required beginning date based on age 70½. The statute has since moved RMDs to age 73, and Article VII of the forms states the agreement is amended by law. In practice, you follow the current RMD age, document the citation, and store the signed account form in the file.

Software and file readiness

Always download the newest PDF directly from IRS.gov and open it with Adobe Acrobat Reader. The IRS forms library specifically notes Reader is required, which avoids blank fields, missing instructions, or signature issues that pop up with browser viewers. Save a date‑stamped PDF to the engagement folder.

How to complete Form 5305‑S accurately, step by step

Before you start

• Confirm the SIMPLE plan exists, and identify whether it was adopted on 5304‑SIMPLE or 5305‑SIMPLE. Add the adoption document to your checklist.
• Pick the correct account form, 5305‑S for trust or 5305‑SA for custodial, per the financial institution’s process. Many institutions prefer their own updated templates, so check their packet first.
• Open the IRS PDF in Adobe Acrobat Reader to preserve fields and instructions.

Required fields to complete

• Participant information, name, address, date of birth, and the account number if provided by the trustee or custodian.
• Trustee or custodian details, legal name and business address.
• Check the “transfer SIMPLE IRA” or “amendment” box only when appropriate.
• Signatures, participant and trustee or custodian. Confirm whether your institution accepts qualified e‑signatures and how they want the file named.

Tip from the review chair, add a one‑line workpaper note with the exact file name, storage path, and the date the trustee returned the countersigned form. It saves future audits minutes that feel like hours.

Version control and audit trail

• Note the revision on the PDF, today the IRS shows “Rev. April 2017” on both 5305‑S and 5305‑SA. That is normal. Keep a copy of the PDF and the IRS page that lists the form as current in the year you adopt it.
• When a statutory change updates operations, for example RMD age to 73, the agreement is deemed updated by law. Your workpaper should point to the current IRS RMD page.

SIMPLE IRA distribution rules you must document

The two‑year rule, the penalty, and the only rollover you can make

During the first two years from the date contributions first hit a participant’s SIMPLE IRA, any distribution can trigger an additional 25% tax unless an exception applies. In that same two‑year window, the only rollover destination that stays tax free is another SIMPLE IRA. After two years, rollovers to traditional IRAs or to plans like a 401(k) are allowed, and the usual 10% early distribution rule applies if the participant is under 59½. Put the participant’s first‑contribution date in your file, then check it before any transfer.

Required minimum distributions

Current law sets the required beginning date at age 73. The first RMD is due by April 1 of the year after the participant turns 73, and the second by December 31 of that same year (deferring the first RMD to April 1 lands two RMDs in the same calendar year, which can push the participant into a higher tax bracket). Missing RMDs can trigger a 25% excise tax, which can drop to 10% if corrected in time. Add a simple “RMD year watch” line to your checklist for any participant approaching age 73.

Roth and SIMPLE, what you need to know in 2026

SECURE 2.0 permits SIMPLE IRA plans to offer Roth contributions in certain cases. However, the IRS model account forms 5305‑S and 5305‑SA have not been re‑issued with Roth language, and the IRS still shows them as April 2017 revisions. In practice, many institutions use updated documents for Roth SIMPLE accounts, and the IRS acknowledges Roth SIMPLEs in current instructions for Form 8606. Coordinate with the institution on the correct Roth paperwork, and document it in your file.

Practical move, confirm with the custodian how Roth SIMPLE contributions will be tracked and reported, including any 1099‑R reporting for employer Roth contributions, then add that confirmation email to the engagement folder.

Build a clean workflow your reviewers will thank you for

The short checklist

• Verify plan adoption form and effective date, 5304‑SIMPLE or 5305‑SIMPLE.
• Confirm eligibility and notice timing with the model notice inside the plan form.
• Open the right account form for each participant, 5305‑S or 5305‑SA.
• Add 2026 limits to the participant notice or onboarding email, 17,000 deferral, 4,000 catch‑up, or 18,100 if the plan qualifies as an applicable SIMPLE.
• Record the two‑year first‑contribution date for each participant.
• Save countersigned PDFs and the IRS citations used in your review notes.

Completing the plan‑side tasks, so the account forms are the easy part

Use the SIMPLE plan forms with confidence

Form 5304‑SIMPLE lets employees choose their own IRA provider, while 5305‑SIMPLE points everyone to a designated institution. Both include the Model Notification to Eligible Employees and a salary reduction agreement you can hand to payroll. Keeping those templates inside your onboarding packet reduces back‑and‑forth and keeps compliance visible.

Timing and setup

You can set up a SIMPLE IRA plan effective any date from January 1 through October 1 of a year, with special relief for new employers formed after October 1. Document your effective date, then confirm when salary reductions begin and when employer contributions are due. Publication 560 is your friend for deadlines, notices, and responsibilities.

How to communicate 2026 limits clearly to clients and participants

• Deferrals, 17,000. Standard catch‑up at age 50, 4,000. Some applicable SIMPLEs get 18,100 and a different catch‑up schedule. Point to the IRS 2026 COLA notice in your email or portal message.
• Employer contribution choice, 3% match or 2% nonelective. Spell out which option the employer chose in the annual notice.
• Remind payroll that SIMPLE deferrals are separate from any other plan limits the employee might have at another job. Keep the conversation simple, if an employee defers elsewhere, the other plan’s deferrals do not change the SIMPLE IRA limit but they count toward the employee’s overall elective deferral cap in those other plans. For SIMPLE specifics, stick to Publication 560 and the IRS SIMPLE limits page.

Common mistakes and how to avoid them

The same handful of 5305-S errors show up across nearly every plan file we review. Most come from treating the form like a return rather than an account agreement, or from relying on form text that pre-dates the SECURE Act updates.

When delivery, not sales, is the real bottleneck

If your firm has clients adopting SIMPLE IRAs each fall, the bottleneck is rarely demand. It is delivery, version control, review cycles, missing notices, and turnover during peak season. If you need help systematizing this work, treat offshore capacity like operations, not resume farming. The win comes from SOP‑driven execution, standard workpapers, layered review, and clear SLAs, not just extra hands.

Accountably works with CPA and EA firms that want disciplined offshore delivery for repeatable compliance work, including SIMPLE plan onboarding packets, employee notices, and form storage. Teams plug into your systems, your templates, and your deadlines, so partners stay out of review loops and on client strategy. Use this only if it adds control and speed to your existing process.

Compliance notes you can paste into your review memo

• “Plan adopted on Form 5304‑SIMPLE or 5305‑SIMPLE, current IRS version attached. Participant accounts established on 5305‑S or 5305‑SA as required.”
• “2026 SIMPLE deferral limit 17,000, standard catch‑up 4,000, applicable SIMPLE limit 18,100. Verified against IRS Notice 2025‑67.”
• “RMD age 73 per IRS guidance. Model form shows 70½, operate under current law.”
• “Two‑year SIMPLE rule monitored by first‑contribution date. Rollovers restricted in first two years, 25% additional tax may apply.”

Sources to keep in the client file

• IRS retirement forms library page that links to 5305‑S, 5305‑SA, 5304‑SIMPLE, and 5305‑SIMPLE PDFs.
• Form 5305‑S and 5305‑SA PDFs with visible “Rev. April 2017” headers.
• IRS 2026 retirement plan limits news release and Notice 2025‑67, which list SIMPLE amounts and catch‑ups.
• SIMPLE IRA withdrawal and rollover rules page, for the 2‑year and 25% references.
• RMD page, for the age 73 rule and penalty mechanics.
• Publication 560 for small business retirement plan operations.

Reusable Checklists

The checklists below are written so you can paste them into firm SOPs, plan onboarding packets, or year-end review templates. Each one maps to a specific point in the 5305-S lifecycle where small misses create big cleanup later.

Keep 5305-S Season From Stalling

SIMPLE IRA setup work tends to land in two waves: the fall plan-adoption window when employers establish or amend a SIMPLE plan, and a steady drip of new-hire onboarding once the plan is live. Form 5305-S is the account-level agreement that gets executed each time, and the moment where small errors (wrong form variant, missing disclosure statement, stale RBD language) become permanent record problems. The form carries a Rev. April 2017 header on the PDF and has not been updated since, so practitioners who lean on the form text alone walk straight into pre-SECURE rules.

The fix is not more hands. It is a tighter intake routine that catches the trust-versus-custodial choice, locks in the disclosure statement, and overrides the obsolete age 70 1/2 language with current law in the workpapers.

• Standardize the 5305-S intake packet: trustee qualification check, disclosure statement under Treasury Reg 1.408-6, identification block, and the Transfer SIMPLE IRA checkbox decision.
• Build a two-year-rule tracker keyed off the first SIMPLE contribution date, so rollover and distribution requests inside that window get flagged before processing under IRC 72(t)(6).
• Replace the form's age 70 1/2 references with a one-line file memo confirming RBD age 73 under SECURE 2.0 for participants reaching age 72 after December 31, 2022.
• Route Article VIII edits through a second reviewer and note that only Articles I through VII carry IRS review.
• Keep the summary description duty under IRC 408(l)(2) on a separate line in the trustee's annual review, with the transfer SIMPLE IRA exception called out.

Accountably builds these intake routines for trustees and accounting practices that want a clean SIMPLE IRA file every time, not a cleanup project in audit. See our tax delivery service for how the offshore team plugs into existing plan-onboarding workflows.

FAQs

Do I file Form 5305‑S or 5305‑SA with the IRS?

No. These are account agreements. The participant and the trustee or custodian sign them, then you retain them with the records. Do not mail them to the IRS.

Which form creates the SIMPLE IRA plan for an employer?

Use Form 5304‑SIMPLE if employees can choose their own IRA providers, or Form 5305‑SIMPLE if the employer designates one financial institution for everyone. Both include the employee notice and salary reduction agreement.

What are the SIMPLE IRA contribution limits for 2026?

Employee deferrals are 17,000. The standard age‑50 catch‑up is 4,000. Certain applicable SIMPLE plans have a higher deferral limit of 18,100, subject to eligibility rules in SECURE 2.0. Keep the IRS COLA notice in your file as proof.

When do RMDs start for SIMPLE IRAs now?

At age 73. The model account forms still display older 70½ language, but you must operate under the current rules and document your source in the file.

What is the SIMPLE two‑year rule I keep hearing about?

The two‑year clock starts on the first day a SIMPLE contribution hits the account. Within that window, only transfers to another SIMPLE IRA stay tax free, and early distributions generally face a 25% additional tax unless an exception applies. After two years, the usual IRA rollover rules and 10% early distribution penalty apply.

Can a SIMPLE IRA be Roth, and what paperwork applies?

SIMPLE IRA plans can allow Roth contributions under SECURE 2.0, however the IRS 5305‑S and 5305‑SA model forms have not been re‑issued with Roth provisions. Many financial institutions use their own updated documents to support Roth SIMPLEs. Confirm the custodian’s process and keep that confirmation in the workpapers, along with any 1099‑R reporting for employer Roth contributions.

Do I need Adobe Acrobat Reader for these forms?

Yes. The IRS forms library specifies Adobe Acrobat Reader to view, print, and search retirement forms. Using other viewers risks missing fields and signatures.