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SIMPLE IRA termination


HipHiro
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I own a small business. The only employees are me and my wife.

In 2016, I set up a SIMPLE IRA which we have maxed out in 2016 and 2017, making the first deposits in March 2016.

I recently came to believe that a Solo 401(k) would be a better option for our circumstances. I would like to establish it and start contributing to the Solo 401(k) as soon as possible.

I understand the funds in the SIMPLE cannot be transferred before April 2018 without significant penalty.

I don't think I can contribute in 2017, per the "one plan requirement". However, can I have an effective date for the Solo 401(k) of Jan 1 2017 or now or do I have to wait until Jan 1, 2018 or Jan 1, 2019?  In other words, does the one plan requirement mandate only having one plan or only contributing to one plan?

What is the earliest I can contribute to the Solo 401(k)? I think I can start Jan 1, 2018, if I don't contribute to the SIMPLE in 2018, but I'm not sure. Do I need to terminate the SIMPLE (announce to myself and my wife before November 2nd) before I contribute (same as my previous question)? Can I terminate the SIMPLE this year, or do I have to wait until March 2018 (the two year anniversary of the first deposit)?

 

Thanks!

HH

 

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You can begin (and start contributing to) your solo(k) on January 1, 2018.  There isn't going to be any significant action to take on the SIMPLE IRA other than waiting until April 2018 to roll over the accounts (or even leave them put).  As for as terminating, you're merely not renewing it for 2018 (because you're starting the solo k plan).  Normally, some communication to employees would be required, but since it's just you and your wife, then there is no significant action.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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