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Employer Signatures on IRA Adoption Agreements

Q: You have a non-profit client with a simplified employee pension plan (SEP). They need to make a contribution for a former employee who has not responded to requests to complete enrollment paperwork. You’ve checked with the custodian, and they will not allow the employer to establish the account without the participant's signature. What are their options?

A: The current SEP regs and IRS Announcement 80-112 permit an employer to sign the IRA Adoption Agreement when the employee is unwilling or unable to do so (if they have died, for example). There also are coordinating provisions under the USA Patriots Act that permit the financial institution to accept the signature from the employer. So this is a rule that was validated back in 1980. Most document providers have a special adoption agreement for this purpose for SEPs and SIMPLE IRAs.

If the current provider still will not accept the employer's signature on the adoption agreement to establish the account, the only option is to tell the employer that it needs to adopt an IRA somewhere else where the financial institution will accept their signature. But the problem with that approach is that we have seen that financial institutions may not accept them if the SEP plan is not with them!