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SIMPLE IRA Plans and the merger exception - can the employees of the S


Guest LBBarr
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This issue arose in connection with a merger of 2 entities, one has a SIMPLE IRA Plan and the other has a 401k plan. As noted in IRS Notice 98-4:

"an employer can make contributions under a SIMPLE IRA Plan for a calendar year even though it maintains another qualified plan if ...The other qualified plan is maintained by the employer during the calendar year in which an acquisition, disposition or similar transaction occurs (or the following calendar year); the requirements of this Q&A B-3 would have been satisfied if the transaction had not occurred (and thus the employer maintaining the SIMPLE IRA Plan had remained a separate employer); and only ndividuals who would have been employees of that “separate” employer are eligible to participate in the SIMPLE IRA Plan."

My question is, can the employees of the SIMPLE IRA Plan sponsoring entity participate in the 401k plan?

Thanks

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First, with the help of some of my friends, think that the employees of the mergering/acquiring entity are being disregarded with respect to the multiple plan rule. If you look at the legislative history and similar rulings this would be true. So my answer is no, the employees of the original SIMPLE IRA could not participate in the 401(k). There may also be a problem in not covering all eligibles in the SIMPLE, if that is done.

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