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SIMPLE 401k and regular 401k in same year


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What are the ramifications of a company that has a SIMPLE 401k in place, and sets up a normal 401k plan in the same year. I know you cannot have any other plans if you have a SIMPLE 401k.

Would that disqualify the entire SIMPLE plan or just the current year contributions? Would it only affect Highly Compensated employees, or everyone?

thanks in advance

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  • 4 weeks later...

I have a prospect wanting to establish a 401(k)/PS plan now for 2016. They have a SIMPLE IRA and have made contributions YTD. The link above and the IRS' "fix it" guide say to stop SIMPLE contributions for the fix, but this doesn't really fix the problem for 2016. This year's SIMPLE contributions still have to come out of the IRAs, right?

And there is still the problem of no way to code these "refunds" that doesn't trigger IRS thinking they are premature distributions from the SIMPLE, right?

What about 402(g)? If an employee has already contributed $10K to a SIMPLE this year, can they still do $18K to a 401(k), given that the $10K has to come back? Or does the $10K still count toward the limit?

I carry stuff uphill for others who get all the glory.

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