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Switch from SEP to SIMPLE


Guest Peggy806
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Guest Peggy806

Employer had SEP in 2008 and wants to do a SIMPLE in 2009. Are there any issues with terminating the SEP and starting up the SIMPLE this year? Can they use the same IRA that they used for the SEP? Do we have to formally terminate the SEP?

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In general, a SIMPLE IRA plan can not be established for the 2009 CY after October 1, 2009--this is to allow for meaningful participation. The IRAs must registered as a "SIMPLE-IRAs" with the trustee or custodian. Hope this helps.

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Guest Peggy806

ok, let's say it was 9/1/09 and I asked the same question. Can they just stop the SEP for 2009 and have the SIMPLE in a new SIMPLE IRA? There is only one employee in the company, in case that questions is looming in your miind.

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Maybe; but not if any SEP contributions are made in, or for, a plan year ending in 2009. In general, a SIMPLE IRA plan must be the only plan of an employer (the "exclusive plan requirement"). If no SEP contributions have or will be made to a CY SEP plan, then the SIMPLE IRA plan could have been established for 2009 (if done timely, i.e., on or before Nov. 1, 2009).

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