Lou S. Posted July 31, 2018 Report Share Posted July 31, 2018 What are the penalties of starting a Qualified Plan in a year when a SIMPLE IRA is in existence? I know you are not allowed to terminate a SIMPLE-IRA mind year but what if no one elects to make contributions to it? In 2017 on advice of prior accountant, 2 employee shop, both 50% owners set up a SIMPLE IRA for 2017 and continued for 2018. Contributions for 2017 were funded. No contributions have yet been made for 2018 and the 2 owners will be the only eligible employees of the SIMPLE IRA in 2018. They are having a much better year than expected and their new accountant would like to do a 401(k) plan with PS component to maximize deduction. If they establish a 401(k) with PS what is the affect on the following 1 - The existing SIMPLE IRAs that hold only the 2017 contributions? 2. The SIMPLE-IRA if no contributions are made for 2018? 3. The SIMPLE-IRA for 2018 if contributions are made for 2018? 4. The newly formed 401(k) Profit sharing plan? I know you are not supposed to have a SIMPLE-IRA and Qualified Plan in the same year but if the penalty is remove the $0 of 2018 contributions along with the $0 of earnings, is there really a penalty for having both? Link to comment Share on other sites More sharing options...
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