Guest MrBoldman Posted February 7, 2005 Share Posted February 7, 2005 I have a client who wishes to "upgrade" to 401(k) Plan from a SIMPLE IRA. Can they implement the 401(k) in 2005 even thought they have already had dedcutions in the SIMPLE IRA for 2005? Can the SIRA have a short plan year? Link to comment Share on other sites More sharing options...
Earl Posted February 8, 2005 Share Posted February 8, 2005 This is covered a couple of times on the IRS board. Gary Lesser was very helpful. CBW Link to comment Share on other sites More sharing options...
Bird Posted February 8, 2005 Share Posted February 8, 2005 To save you some trouble looking for prior threads... A SIMPLE can't exist in the same year as a 401(k). That doesn't mean you can't adopt a 401(k); it means that if you do the SIMPLE is not valid for that year. So then you have a godawful mess with payroll issues, contributions that have to be recharacterized, etc. I wouldn't try this unless there were huge savings to be gained under another plan; just make a clean break at the end of the year. Ed Snyder Link to comment Share on other sites More sharing options...
Earl Posted February 8, 2005 Share Posted February 8, 2005 If you only have a couple of employees the payroll issues were not that bad. If you are only looking to do the 401k max vs the SIMPLE, why bother. If you are looking at Profit Sharing and 415 max, its worth it, I think anyway. CBW Link to comment Share on other sites More sharing options...
Guest jusducki Posted February 9, 2005 Share Posted February 9, 2005 Speaking of SIMPLEs, I have another question - if new 401(k) plan allows for rollovers, including IRAs, once the SIMPLE plan is closed can the account balance be rolled into the 401(k)? My thought was yes but someone said he thought there was a two year wait to do this. If true, why? Thanks. Link to comment Share on other sites More sharing options...
jevd Posted February 9, 2005 Share Posted February 9, 2005 There is a two year wait or a 25% penalty may be imposed. However, see the NESTEG bill re-introduced in the Senate. This will remove the 2 year wait among other things. JEVD Making the complex understandable. Link to comment Share on other sites More sharing options...
Guest jusducki Posted February 9, 2005 Share Posted February 9, 2005 Does anyone know of a case where the 25% penalty was actually imposed? Curious what the logic is for any penalty ?? Link to comment Share on other sites More sharing options...
Guest rgorman Posted February 9, 2005 Share Posted February 9, 2005 My understanding was that as long as you have been a participant in the SIMPLE for two years, then there was no 25% penalty to distribute the funds. All contributions do not have to be in for two years. We just worked with one where the SIMPLE has been around since 1999, stopped deferrals into SIMPLE as of 12/31/04 and we will be rolling those assets into the 401(k) PS that was effective 1/1/05. Link to comment Share on other sites More sharing options...
Appleby Posted February 11, 2005 Share Posted February 11, 2005 There is a two year wait or a 25% penalty may be imposed. ...and the amount would be considered ineligible for rollover , unless the account has met the two year requirement Life and Death Planning for Retirement Benefits by Natalie B. Choatehttps://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/ www.DeniseAppleby.com Link to comment Share on other sites More sharing options...
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