401(k) Rollover to SIMPLE IRA

[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.

[jevd]

No,

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

[Appleby]

...also, you cannot maintain a SIMPLE IRA in any year that you maintain another employer plan

[mbozek]

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.

[Appleby]

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.

[Gary Lesser]

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)]