IRA Adoption Agreement and Plan Document: Overview

What Is an IRA Adoption Agreement and Plan Document?

An IRA Adoption Agreement and Plan Document is a contract between the owner of an IRA and the financial institution where the account is held. The IRA adoption agreement and plan document must be signed by the account owner before the individual retirement account (IRA) can be valid. It contains basic personal information about the account holder, such as their address, date of birth, and Social Security number (SSN), and lays out the detailed rules regarding the retirement account. This article highlights the details about this contract and the associated forms.

IRA Adoption Agreement and Plan Document Explained

The IRA adoption agreement and plan document provides investors with some very important information about the plan. This includes:

• The plan's annual contribution limits
• Eligibility requirements
• How contributions may be invested
• Types of investments that are prohibited (e.g., collectibles)
• Amounts that may be invested

The contract further outlines how and when account funds may be withdrawn, provisions regarding required distributions, how employer contributions are allocated, under what conditions the account may be transferred, what will happen to the account if the owner (depositor) dies, and what fees and expenses are associated with the plan.

An IRA adoption agreement must be accompanied by a basic plan document that explains how the plan will operate.

IRS Forms

An account owner should complete an IRA adoption agreement for traditional and Roth IRAs, 529 and other education plans, and Health Savings Accounts (HSA). This agreement is also completed for qualified plans, SIMPLE IRAs, SEP IRAs, and a variety of employer-sponsored retirement plans.

The Internal Revenue Service (IRS) provides informational guides and forms covering IRA adoption and plan documentation in the Form 5305 series.

• Form 5305: Traditional Individual Retirement Trust Account
• Form 5305-A: Traditional Individual Retirement Custodial Account
• Form 5305-E: Coverdell Education Savings Trust Account
• Form 5305-EA: Coverdell Education Savings Custodial Account (Under section 530 of the Internal Revenue Code)
• Form 5305-R: Roth Individual Retirement Trust Account
• Form 5305-RA: Roth Individual Retirement Custodial Account
• Form 5305-RB: Roth Individual Retirement Annuity Endorsement
• Form 5305-S: SIMPLE Individual Retirement Trust Account
• Form 5305-SA: SIMPLE Individual Retirement Custodial Account
• Form 5305-SEP: Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement
• Form 5305-SIMPLE: Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) for use with a Designated Financial Institution
• Form 5306: Application for Approval of Prototype or Employer Sponsored Individual Retirement Arrangement (IRA)