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Simple IRA and Profit Sharing Plan?


Guest snmhanson
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Guest snmhanson

Can a business with non-union employees operate and contribute to both a Simple IRA and a profit sharing plan at the same time? Based on the Simple IRA section in IRS pub 560 I am under the impression that it is not permissible unless the profit sharing plan is part of a collective bargaining agreement. And even if there is a collective bargaining agreement contributions can still only be made for one plan or the other per each employee, correct? Am I missing anything here or would a business who operated both plans for more than one year be out of compliance?

Thanks

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  • 2 weeks later...
Guest Sieve

Your analysis is correct. As long as only the collctively-bargained employees participate in the PSP, and as long as those same employees are excluded form particiaption in the SIMPLE, then the employer can maintain both plans. This means, by the way, that the non-collectively bargained emoployees cannot even accrue forfeitures under the PSP (in the event they once were in that plan).

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  • 2 weeks later...
Guest snmhanson

Thanks for the response Sieve. Sorry about my delay in this response as I haven't checked the board in a couple weeks. Can you tell me what the best course of action would be for a business that has maintained and contributed to both plans for the last few years?

Thanks again,

Matt

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Guest Sieve

Sorry--I didn't read your first post as saying you had only non-union employees. I thought you had union & non-union employees.

You would correct under EPCRS, specifically VCP. You can find info in Rev. Proc. 2006-27 and on the IRS website. (But be careful, because the IRS is issuing an updated EPCRS later this summer). The correction method is to cease making contributions to the SIMPLE IRA as soon as the VCP application is filed (if not earlier), and to make all other necessary corrections if the SIMPLE IRA has any other issues that need correcting. This is called an Employer Eligibility Failure.

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