Function

• A broker is both a sales and service person for SIMPLE IRA investments. Initially, the broker sells the plan and makes money on not only the initial investment but also future investments. The broker also receives a portion of the 12-B1 fees for all assets under management. This is one way a broker also receives payment for servicing accounts and maintaining clients. If the broker leaves the business or leaves employment of a specific firm, one of two things occurs. Either you have no broker of record or the company he worked for assigns someone else to be that broker.
  
  

Considerations

• Since brokers often service the entire plan, and not just one account, the broker of record normally is the broker who wrote the plan. You can select your own broker if you wish, however. When a broker leaves a company, each SIMPLE IRA needs to change to a new broker of record individually, since many times the company doesn't change all the plan's IRAs as a group.
  
  

Effects

• If the company doesn't assign someone to your SIMPLE IRA or your company's SIMPLE IRA, you need to take action. Your deposits normally have a load and almost all have a 12-B1 fee that pays for your service. If you have no broker of record, you're paying for something you don't receive. You can call the mutual fund company or the bank or institution that employed your broker to get someone else assigned to the plan.
  
  

Process

• Changing over is simple but requires paperwork. In most cases, companies have a form called "Change of Broker" that allows you to indicate the new broker you'd like. Sometimes you don't have to sign the form, but simply provide the account number, and the broker does the rest. All employees are allowed to chose their own company and broker according to the form 5304-SIMPLE form the IRS requires your employer to give you.
  
  

Significance

• If you find your broker doesn't give the service your company deserves, you have alternatives. You don't have to wait to get a different broker. You can request a change in brokers through the mutual fund or annuity company. They'll give you a list of brokers in your area that can take over your plan.
  
  

Potential

• Sometimes, you have to remain with the company that sold the plan, even though the broker of record changes. Plans purchased through investment advisers that work for banks often fall in this category. Although you can change to any broker in the bank system, you can't simply move the plan to another company without rolling over the entire plan and starting a new one. This is often because bank products are separate from brokerage house products, particularly in the area of annuities.