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SIMPLE and 401(k) in a controlled group

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Since SIMPLE plans are subject to the controlled group rules (i.e. all members of the controlled group are treated as a single employer for qualified plan requirements), would it be correct to say that there can not be a SIMPLE sponsored by one controlled group member and a 401(k) sponsored by the other controlled group member in the same year?



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Actually, expanding upon previous comment, I believe the 410(b)(6)© transition period covers both the initial year AND the following year. So if the previously unrelated employers become a controlled group due to a 410(b)(6)© transaction in 2013, then you are potentially ok for 2013 and for 2014.

Well, darn this autocorrect - it keeps changing the "C" that is supposed to be in parentheses. Can't seem to get it to work correctly...

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I don't do SIMPLEs, but the question peeked my interest.

Suppose Company A sponsors the SIMPLE for members of Company A

and Company B sponsors a 401(k) for company B members only.

1.401(k)-4©(1) says the SIMPLE must be the exclusive plan for each SIMPLE 401(k) plan participant ...under any other qualified plan maintained by the employer

so I don't think having a controlled group necessarily negates the ability to have a SIMPLE. In fact, the mere statement saying 'under any other plan maintained by the employer' implies you could have other plans.

(it might show a bit of insanity on the company's part, but that is another issue)

The coverage rules might cause the plan to fail.

Certainly if the controlled group is above 100 employees you can't do it (1.401(k)-4(b)(1)

1.401(k)-4(b)(2) then says you have the 2 year rule to fix the problem.

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  • 3 years later...

Per this discussion, what if Company A sponsors a Simple and Company B sponsors a QACA. In mid plan year (3/2017) Company A acquires Company B (stock purchase) can Company A terminate or freeze the simple and take sponsorship of Company B's QACA plan, or would they need to run separate plans until 12/31/2017?

Additional info: At time of merger the total eligible participants would then exceed the allowable number of eligible employees for a Simple.

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