Amending SIMPLE 401k to 401k

[Guest Ddalk]

Can a SIMPLE 401(k) be amended to a 401(k) plan in the middle of the simple's plan year?

Gary Lesser has commented that such an amendment cannot take effect any earlier than the first day of the next plan year. But the citation is for Rev. Proc. 97-9 (the model amendment for incorporating a 401(k)SIMPLE).

I have also seen commentary approving of such a mid-year amendment and that contributions existing under the SIMPLE for the plan year until the time of amendment are accounted for separately (b/c of 100% vesting) from the subsequent 401(k) contributions.

I'd appreciate any guidance with this matter.

[actuarysmith]

How do you get around the prohibition related to not sponsoring any other plan during the same plan year as the SIMPLE?

I would agree with Gary Lessor's conclusion..............

[Guest jdw]

No. See IRC 408(p)(2)(D). Exceptions for union plan and 410(b)(6)©-type acquisitions.

[Guest Ddalk]

Thanks for the help. I should know better than to question Gary Lesser. You live and learn.

[R. Butler]

Its debatable. As pointed out in the intial post Gary Lesser's comment referred to the IRS model language. As also pointed the intial post if the plan doesn't use the model language several reputable commentators say its permissable.

I would probably be cautious and reccommend against it, but others will disagree. Just make sure if you do it, you can pass the ADP test and that there are not any anticutback issues.