SIMPLE IRA + 401(k) Plan

[JustMe 3]

Client maintained a SIMPLE IRA at the time of acquisition of an employer with a 401(k) plan and both plans will remain through the transition period of the end of the plan year following the year of the acquisition transaction.  The SIMPLE IRA still only benefits the participants originally eligible for it and the same with the 401(k) plan. Can the 401(k) plan be amended and not destroy the transition period that allows the 2 retirement plans to exist simultaneously through the transition period? 

[John Feldt ERPA CPC QPA 100]

Sure, you can amend to change the trustees and to change the plan name, things of that nature.

[Flyboyjohn 59]

Are you sure the 410(b)(6) transition rule applies when you're not dealing with 2 qualified plans?

Also note that the 408(p)(10) transition rule for SIMPLE IRAs provides a longer transition period (end of 2nd calendar year after calendar year in which the offending transaction occurs)

 

[JustMe 3]

@John Feldt ERPA CPC QPA - The plan may need to be amended to allow an additional participating employer so that a newly acquired entity may now participate in that plan.  I'm thinking that sort of an amendment that changes the coverage population would destroy it, but would appreciate your thoughts.

@Flyboyjohn - Unfortunately this group doesn't have the 2 year transition period since the group exceeded the 100 person mark due to acquisitions.

[John Feldt ERPA CPC QPA 100]

My understanding is that amendment, as you described, would end the transition period. If your client is a serial acquirer, this is certainly one on the problems they face if they are relying on using the transition period. 

[JustMe 3]

Great, thank you so much for responding John.  That is my understanding/interpretation as well.