What do you do if an employee terminates and closes their Simple IRA prior to matching contribution. This particular case involves only a very small amount of money approx. $100 and the original company will not reopen the account for the deposit. It is my understanding that an account must be established, but we have found that no institution will open a simple for this one time small deposit. Any suggestions??

The matching contribution can be deposited into any SIMPLE IRA (assuming that a DFI is not being used). A bank would probably establish the account.

If the employee is unwilling to establish account or can not be located, the employer can establish account on employee's behalf.

If contribution not made, then the Simple is not a Simple for the year and all 2004 contributions are excesses (generally reported in Box 1 of Form 1099 (for 2004), or not deducted if SE). To avaid the possibility of double taxation, the excess should be removed before due date of individual's federal income tax return.

Hope this helps.

Closing a custodial or other account that is used to hold the IRA funds is not a closing of the IRA. The account is not the IRA. Another "holding" account can be opened by either the employee or the employer on behalf of the employee.