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SIMPLE IRA - VCP Correction & New 401(k)


EBECatty
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I'm fairly certain this is fine, but any input would be appreciated.

Client had a SIMPLE IRA but exceeded 100 employees for several years beyond the grace period. Per EPCRS, the correction is to stop all contributions immediately and submit through VCP. Nothing requires (or permits) the SIMPLE to last throughout the rest of the year as would otherwise be required. The correction is simply to stop all contributions mid-year. 

Client also wants to start a 401(k) to replace the SIMPLE beginning 1/1/21. Generally we would be past the 60-day notice period to terminate the SIMPLE at 12/31/20, but presumably if VCP requires ceasing contributions before then, we would not have to follow the typical 60-day period.

In that case, we can "terminate" (via VCP) the SIMPLE during December 2020 and start a new 401(k) on 1/1/21, correct?

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