SEP/SIMPLE after Termination of 401(k)

[Gary Lesser]

In response to numerous personal mail messages....

A SEP is not a "successor" defined contribution plan for the purposes of Code Section 401(k)(10)(A)(i). The purpose of that section is to prevent participants from gaining premature access to their funds. Requiring transfer into a SEP would accomplish nothing. This position is supported by the regulations under that Code Section. The same rational would apply to a SIMPLE IRA. Furthermore, a SIMPLE IRA plan may not accept rollovers from a qualified plan. In the case of a SIMPLE, the only contributions that are permitted are contributions (i) under a qualified salary reduction arrangement, and (ii)rollovers or transfers from other SIMPLE IRAs (UNLESS subject to the two year restriction, see IRC 408(d)(3)(G)).