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401(k) Rollover to SIMPLE IRA


Guest Bob Lees

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Guest Bob Lees

Have a client who is terminating his traditional 401(k) plan and starting a SIMPLE IRA. Can we rollover the 401(k) balances into the new SIMPLE IRA?

Do you see any problems in terminating the 401(k) and starting a SIMPLE IRA.

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No,

Simple IRAs must contain only Simple IRA contributions. The participants may rollover to traditional IRAs or another plan if available. See Publication 590.

JEVD

Making the complex understandable.

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A: I thought the restriction only applied for years in which the employer contributed to a qualifed plan, 403(B) annuity, sep or participants accrued a benefit for such plan. IRC 408(p)(2)(D). Maintaining a frozen plan does not prevent contributions to a Simple Plan.

mjb

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I think we are in agreement… a qualification may be necessary in understanding the definition of qualified plan for this purpose. For this purpose, determining the “only plan for the employer”, a qualified plan is defined in the same manner as it is defined to determine one’s active participant status for purposes of being able to take a deduction for a contribution to a Traditional IRA… an employer who has a frozen plan, is not considered to maintain a qualified plan, for purposes of ‘determining the only plan for the employer’, unless the Frozen plan is a defined benefit plan for which the benefit accruals (determined before the plan was frozen) is increased in tandem with salary increases.

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

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The only contributions that may be made into a SIMPLE IRA are those made under a qualified salary reduction arrangement and transfers/rollovers from another SIMPLE-IRA. [iRC Sec 408(p)(1)(B)]

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