Acquiring SIMPLE IRA

[Guest CJErisa]

Hopefully someone can provide some input on this issue.... New Company is acquiring substantially all of the assets of Old Company in an asset deal. New Company will continue Old Company's business and will continue to employ substantially all of Old COmpany's employees. Old Company will cease to exist after the deal closes on Nov. 30. Old COmpany has a SIMPLE IRA for its employees that New Company intends to continue "as-is." Does New company need to set up a new SIMPLE plan with the same FI? Or can it just assume the old plan? any thoughts are greatly appreciated as I'm not finding much guidance and we're on a very tight timeframe.

[Bird]

I think you'll need to sign a new adoption agreement; the name and tax ID are certainly different and it's not like you would want to bother crafting a lengthy amendment changing the employer when that's about all that is on the adoption agreement anyway. Then talk to the financial institution about how to link the old accounts to the new "plan." Keep in mind that the SIMPLE IRA plan is just a vehicle to get money into the SIMPLE IRA accounts.

I'd lean on the financial institution for help on this.

[Guest CJErisa]

Thanks! Executing a new adoption agreement over an amendment certainly makes sense. But, since this is an asset deal, will the plan at the buying company be treated as a new plan, with the selling company's plan being terminated? I'm wondering if there is an issue with the rule that a SIMPLE IRA can't be terminated mid-year.

[Bird]

If there are no employees after "x" date then you can let the old plan run to the end of the year. I mean, it's not like the rule about (not) terminating a SIMPLE IRA can force a company to stay in business! (There might even be an exception for when a company ceases to exist but it's not worth the effort to try to find it.)