Top Heavy aggregation with SIMPLE IRA

[AndrewZ]

A company terminated a SIMPLE IRA plan and began a regular 401(k) plan.

It seems that contributions under the SIMPLE IRA would not be required to be included for 401(k) top heavy testing, as Reg § 1.416-1, Q&A T-8 indicates that SEPP IRAs are not required to be aggregated. But I can't find any guidance specifically relating to this issue with SIMPLE IRAs.

Would the fact that SIMPLE IRAs are not subject to top heavy rules preclude them from the aggregation requirement?

I appreciate any input.

[Mike Preston]

I'm not sure I agree with your premise. It seems to me that if a key employee participates in a SEP, then that plan is part of a required aggregation group under T-6. I think the implication under T-8 is that one may aggregate plans that are not already part of the required aggregation group, such as multi-employer, multiple employer and simplified employee plans and would not normally be part of a permissive aggregation group because one does may be in a position where there is no desire (or ability) to aggregate under 410(B).

But that doesn't mean that SIMPLE IRA's are necessarily treated the same as SEP's in this particular case.

But I think history is on the side of treating them the same.

If one looks at the 401(k) LRM's the definition of a distributable event includes the termination of the plan and the establishment of a SIMPLE or a SEP doesn't scuttle the event. Not that this is directly on point, but it is interesting that the Reg upon which the LRM is based was not updated to include SIMPLE IRA's.

Have you checked the history of Q&A's at the various conferences (ASPA, EA) to see if this question has been asked of the IRS?