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Guest jmc51

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Does the phrase "acquisition, disposition or similar transaction" in IRC 408(p)(10) include a sale of assets whereby after the sale of assets the purchase would otherwise violate the 100 employee limit? Any help is appreciated.

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An employer that previously maintained a SIMPLE IRA plan is treated as satisfying the 100-employee limit for the two calendar years immediately following the calendar year for which it last satisfied that requirement. [i.R.C. § 408(p)(2)©(i)(II)]A special transition rule applies if the failure to satisfy the 100-employee limit is the result of an acquisition, disposition, or similar transaction involving the employer. [i.R.C. § 408(p)(10)]

Note. Although it is not entirely clear, it appears that the two-year grace period applies to the year following the year that the employer was no longer an eligible employer at any time during the year. For instance, an employer that exceeds the 100-employee limit in mid-year would, for purposes of the grace period only, be treated as an ineligible employer for that year (even though it was an eligible employer on January 1 of that year). If the grace period is measured as of the first day of the preceding year (when the employer was an eligible employer), then the employer may continue the plan for three years, and the grace period in the examples above would have to be extended by one additional year.

See Q&As 14:47 and 14:48 in Simple, SEP, SARSEP Answer Book.

Hope this helps.

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