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Amend SIMPLE IRA for eligibility?


Guest J Samuelson
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Guest J Samuelson

Is it possible for a new corporation to set up an IRA with an initial eligibility of no service/no comp limits and then change it to the basic 2 years/$5,000 and reasonably expected to earn $5,000 in the current year? I have a client who started business in Jan. 1999 and will start taking salary in April 1999. He has not hired any employees yet, but will later in 1999. He wants to become eligible as soon as he starts to take salary but wants any new hires to wait the two years. (I know, it doesn't sound very non-discriminatory, does it?) I was unable to find anything in my research on amending a SIMPLE IRA for more restrictive eligibility requirements. Thank you.

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I do not believe there is any authority for the answer you wd like to hear. Technically, the plan can be amended in respect to future years. To amend it for the current year is prohibited under the temorary and final regulations. For future years, it would be best to wait until this question is definitively answered by the IRS. For several yjousand dollars your client could ask for a private letter ruling!

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