Guest gfowler Posted September 17, 2004 Share Posted September 17, 2004 I need a few questions answered: A company currently sponsors a Simple IRA plan. The plan has been in place for over two years, but not all of the participants have been in the plan for at least two years. The comany would now like to close down the Simple IRA plan and become an adopting employer of a multiple employer (PEO) plan. My understanding is that the Simple IRA can only be closed at the end of the plan year, and then those employees who have been in the plan at least two years could roll their balance over to the new PEO 401k plan (if they wanted). However, those employees who have been participating in the plan less than two years cannot roll their money to the new PEO 401k plan. What options do the participants with less than 2 years participation have? Can the plan close down at this time? or does the company have to wait until everyone has been a participant for two years? Any help you can give is appreciated. Thank you. Link to comment Share on other sites More sharing options...
alanm Posted September 17, 2004 Share Posted September 17, 2004 The adopting company can't start the 401k in the same calendar year that contributions are made to the simple IRA. The participants in the simple can roll their money to an individual IRA, then from there roll to the 401k at a later date. Link to comment Share on other sites More sharing options...
Guest gfowler Posted September 17, 2004 Share Posted September 17, 2004 So if they terminate the plan 12/31/04, they could adopt the new 401k plan effective 1/1/05? Can they terminate the Simple IRA at any time? thanks. Link to comment Share on other sites More sharing options...
alanm Posted September 17, 2004 Share Posted September 17, 2004 They can terminate the simple any time in 2004, but they can't start the 401k until 1/1/05. They can also just freeze the simple IRA plan in 2004 and not contribute to it in 2005. Link to comment Share on other sites More sharing options...
Appleby Posted September 18, 2004 Share Posted September 18, 2004 Remember that if the SIMPLE Plan is terminated, the SIMPLE IRA assets can remain in each participant’s SIMPLE IRA until the individual owner is ready to make withdrawals or transfer/rollover the SIMPLE assets to an eligible retirement plan. Withdrawing the assets from the SIMPLE is optional. SIMPLEs are not like QPs, where the assets must be distributed from the terminated plan. …also, technically, it is not so much that the company can’t start the new plan in 2004, but that if did, that would invalidate the SIMPLE, causing SIMPLE contributions for the year to be ineligible/excess contributions. …I am not comfortable with a SIMPLE being terminated in mid-year, especially if the required notification was provided before the 60-day period. Gary Lesser can give a definitive response on that. I will transfer the post to the SIMPLE board (this seems most SIMPLE questions anyway), as Gary usually checks there. Life and Death Planning for Retirement Benefits by Natalie B. Choatehttps://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/ www.DeniseAppleby.com Link to comment Share on other sites More sharing options...
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