Conversion from 401(k) to SIMPLE-401k

[perkinsran]

We have a prospect that has a non safe harbor 401k plan with a 50% of first 6% match with about 50% participation. They became top heavy for the first time in 2002 and had to make a 3% to all nonkeys. This cost them an extra $15,000.

It appears we can change the plan in 2004 to be a SIMPLE 401k with 100% match of first 3% and avoid the top heavy rules. TRUE?? Is there any reason you can't change back later if they become non top heavy??

[Tom Poje]

true, plan does not have to make top heavy contributions.

true can switch back to regular 401(k) at a later date. (this would have to be an option if plan ever had more than 100 participants.

must be calendar year plan.

there is a cap on deferrals which is less than the 12,000

match is 100% vested, slightly diffrenet formula than what you have now, etc.