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New SIMPLE IRA if Employer Makes Last Qualified Plan Contribution afte


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Assume Employer A has a qualified plan with a calendar year plan year. In 1999, Employer A terminates the plan. In 2000, Employer A establishes a SIMPLE IRA. In the first quarter of 2000, Employer A makes the last contribution to the terminating qualified plan. Question: Does the last contribution to the qualified plan in the year the SIMPLE IRA is established cause the exclusive plan rule to be violated? Notice 98-4 states that an employer is considered to be maintaining another qualified plan if any employee receives an allocation of contributions for any plan year beginning or ending in the calendar year. Here, the right to the contribution was earned in the preceding year, but the contribution was made in the following year. Any thoughts would be sincerely appreciated.

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Guest Fishchick

It seems that this would be okay since the 401k plan contribution was allocated for the prior year, not the year for which the SIMPLE IRA plan is effective. The allocation of the contribution "officially" takes place during 1999, even though the contribution is made later in your example.

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