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Terminated Simple Plan


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We have a client who recently terminated his Simple Plan. The funds were invested in a life insurance annuity, and all participants except one chose to leave their account balances with the insurance company. The lone participant who asked for a taxable distribution was paid out.

Now we are working on their corporate tax return and find that the employer still owes some match contributions to the Simple Plan. The insurance company refuses to take the match contribution for the employee who took a taxable distribution since her account balance has been paid out and the plan was terminated. What is the proper way to get this match contribution paid out as a taxable distribution to the employee?

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  • 1 month later...

If the employee refuses to establish a new SIMPLE IRA, then the employer could establish one on the employee's behalf. The organization is within its rights not to accept a contribution for a closed account.

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