Guest rustymonty Posted September 20, 2005 Share Posted September 20, 2005 Can a former employee of company A who participated in the 401(k) plan of company A in 2005 and deferred $2,705 in salary deferrals establish their own Simple IRA at their own business (Company B) in the same calendar year? If they can, can they defer the full $10,000 plus matching or are their contributions reduced by the deferrals made into the 401(k). I was not sure given that the 2005 deferral limit for 401(k)'s is $14,000 Link to comment Share on other sites More sharing options...
Gary Lesser Posted September 22, 2005 Share Posted September 22, 2005 Assuming the entities are not controlled, related, or affiliated, Company B may start a SIMPLE IRA. The SIMPLE IRA limits applies to the SIMPLE IRA, and the $14,000/$18,000 limit applies in the aggregate. Link to comment Share on other sites More sharing options...
Guest rustymonty Posted September 22, 2005 Share Posted September 22, 2005 Thank you for the reply. In this case, the employee of Company A did not have any ownership in Company A, but was paid a small amount of W2 and any additional income was paid via 1099 to the employee's firm (Company B). Earlier this year Company A decided to have this employee be an independent contractor and is paying his company via 1099 for his services. With this in mind I do not believe that control group is an issue. The employee's firm (Company B) generates its revenues by commissions paid from Company A, so I am wondering if in this case affiliated services group is an issue. Company A still maintains a 401(k) plan with matching and discretionary profit sharing so it not an attempt by Company A to not cover rank and file employees. Is affiliated service group an issue with that being said? Link to comment Share on other sites More sharing options...
Gary Lesser Posted September 24, 2005 Share Posted September 24, 2005 Of course it is an issue. You must also decide if the individual is an really an "employee" notwithsatnding that they decided to pay the individual on a 1099 form. Since the 401(k) limits are higher, the SIMPLE IRA limits eat up the 401(k) limits on an individual basis. Link to comment Share on other sites More sharing options...
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