Sorry, I misspoke. It is a two year period beginning when the 1st contribution is made, see below.
The Two- Year Period
The two-year period begins on the day the first contribution is deposited to a participant’s SIMPLE IRA and ends two years after that date. The financial institution may use the information that is made available to determine whether the two-year period has been satisfied. However, they are not required to rely on the information that is provided. Instead, they can choose to use the information for contributions that were made to the SIMPLE IRA while they served as trustee/custodian.
Example:
John established SIMPLE IRA # 1234 with custodian XYZ. The first SIMPLE contribution was made to John’s SIMPLE IRA on April 1, 2008. John transferred the assets to SIMPLE IRA # 5678 at Custodian PQR in December 2008, and a SIMPLE IRA contribution was made to account # 5678 on January 15, 2009. If John decides to take am distribution form SIMPLE IRA # 5678 on May 1, 2010, and he is under age 59 ½, he will owe the IRS an early distribution penalty of 10% of the amount withdrawn. Custodian PQR would report the amount as a SIMPLE IRA distribution before the two-year period, because their records shows that the first contribution was made to the account on January 15, 2009, resulting in a report to the IRS that the amount is subject to a 25% penalty, instead of the 10%. However, Custodian PQR may accept copies of the statements for SIMPLE IRA # 1234, showing the contribution being made on Mary 1, 2008 and the transfer being made to SIMPLE IRA # 5678, and use that as basis for reporting the SIMPLE IRA distribution as one that occurred after the two-year period. However, they have the right to choose not to accept the documentation and process the distribution based on their own records.