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Simple _ Changing Eligibility


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A new employer ( guy who bought the previous owners business where the employees were in a SIMPLE plan ) want to continue/start up a new simple for the prople that have worked there for several years - with no eligibility for all those there on the start date.

For new employees down the road he wants to put in the 2 year eligibility requirement.

Is this allowed ( amending plan ) ?

Any other ideas if it is not allowed ?

Thanks,

Bob

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Sounds like a new owner of an existing employer that already has a plan. Seems like the existing eligibility rules under the existing plan would keep the new employees out for 2 years. Please clarify(if needed). Hope this helps.

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THank you.

THe new owner is starting up his own corp with the old employees. So he needs a new plan.

Wants to put himself and other current employees in Simple plan right away but keep future employeres out for 2 years.

Can he do this by amending the plan after a few months ?

Bob

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Please explain exactly how this business was created and organized. Who owned/owns wha?. What was acquired? Does old business still extist, why not. What are relationships?

Why not have new employer adopt the existing plan? Old employer could withdraw. Is this a predecessor/sucessor employer? See IRC Section 414(a)(1) and (2).

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A new employer ( guy who bought the previous owners business where the employees were in a SIMPLE plan ) want to continue/start up a new simple for the prople that have worked there for several years - with no eligibility for all those there on the start date.

For new employees down the road he wants to put in the 2 year eligibility requirement.

Is this allowed ( amending plan ) ?

Any other ideas if it is not allowed ?

Thanks,

Bob

THanks Gary,

Lets make this easier.

Can a company increase the eligibility requirements on SIMPLE's and SEP's from say 1 to 2 years after a few years ?

Bob

It can be done for a SEP. I have never seen a SIMPLE document that allows such, but it may be possible with a prototype or individually designed SIMPLE

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https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

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Maybe. We have discussed this before in this forum and never came to a firm conclusion. Arguably, it may cause discrimination under 408(k)(3). No guidance in the SEP area has ever been provided. In the QP area, such a change may cause discrimination if "prohibited group" members were not eligible to participate (under the new amendment provisions) at the time the plan was originally established and new employees are subsequently hired. See Rev. Ruls. 73-382 and 70-75.

The IRS had also approved a few prototype SEP plans which allow current employees to participate, notwithstanding a service requirement. It is my understanding that such provisions will have to be removed when the plan is next amended.

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