401(k) and SIMPLE IRA

[Guest Tara Curran]

An S Corp has a SIMPLE IRA. The owner of the S Corp wants to set-up a second company as either a C Corp or an LLC and wants to adopt a 401(k) plan. The only employee of the new company will be the owner who will also be an employee of the S Corp. Would any restrictions be placed on the SIMPLE IRA or 401(k) plan because of related party issues? Would the owner be able to defer the maximum under each plan? Would the SIMPLE IRA and 401(k) be subject to a combined limit of the $35,000?

[R. Butler]

An employer can't maintain both a SIMPLE and another qualified plan. From your facts it seems like you have a controlled group. All members of the group are treated as a single employer.