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SIMPLE IRA with ER contribution not yet made


bzorc

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Our firm has a client who maintains a SIMPLE IRA plan. As of today, only employee deferrals have been made to the plan, as the employer usually funds their portion before the due date of their corporate return.

As no employer contribution has been made as of yet, could the company set up a 401(k)/Profit Sharing plan and just make the employer discretionary contribution for 2007 here (in a larger amount of course, as the client has a large profit for the year), and not jeopardize the SIMPLE deferrals for 2007? The SIMPLE would then cease and the 401(k) feature of the plan would commence 1/1/2008.

Thanks for any replies.

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As no employer contribution has been made as of yet, could the company set up a 401(k)/Profit Sharing plan and just make the employer discretionary contribution for 2007 here (in a larger amount of course, as the client has a large profit for the year), and not jeopardize the SIMPLE deferrals for 2007?

Nope. Anything to do with the SIMPLE is invalidated if you set up another plan in the same year.

Ed Snyder

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