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Company w/ Simple IRA acquires Company w/ 401k plan

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Company A sponsors a Simple IRA. Company B sponsors a safe harbor 401(k) Plan. Company A acquires 100% of Company B through a stock acquisition in July of 2017. Both companies want to maintain their plans as is: Company A employees participate in the Simple IRA and Company B employees participate in the 401k.

I'm aware of the transition rules for coverage testing but can the separate plans continue as is past the transition period as long as they meet coverage?

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Nope. If you had 2 401(k) plans, it might be possible, but not with a SIMPLE. And as an aside, there is no "coverage testing" as such for a SIMPLE. You cover (at least) everyone who has met the maximum eligibility requirements. You can be more liberal if you wish.

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There is special acquisition rule for SIMPLE IRA that would cover not only sole plan of employer but eligible employee limit as well.  Code section 408(p)(10) provides same time frame relief as §410(b)(6).

Good to be addressing now since employer has decisions to make and depending upon number of eligible post acquisition, may not be able to sponsor SIMPLE IRA.

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You have the correct answer; it is NO.  This has to be the case or the rules applicable to SIMPLEs would be meaningless and could be avoided by judicious arrangement of business entities.

Again, answer: NO.


Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089

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