Simple 401(k) and 401(k) Plans

[Jilliandiz]

Hello all, i have a few questions.

1.) Can you have a Simple 401(k) Plan and regular 401(k) Plan at the same time?

2.) If you have a 401(k) Plan established, can you rollover the Simple assets

3.) Can you just amend a Simple to become a regular 401(K) ? Or do you have to establish a new plan document all together?

Bottom line, I have a client who currently has a Simple 401(k) Plan, but they are making a lot of money now, and would like to start up a 401(k) Plan, so he can put away more money....I don't know the best plan of action of here?

Any thoughts?

Thanks

[Tom Poje]

yes, you can 'convert' those folks in a SIMPLE to a 401k. in fact, it would have to be possible to do that if you ever went over the 100 ee limit.

You can not convert during the year if you have a model-SIMPLE.

I don't believe there is any guidance if you can convert a non-model SIMPLE to a 401k midyear.

I suppose it is possible to have both a SIMPLE and a 401(k), but the plans couldn't benefit duplicate employees, which certainly doesn't sound like what you are talking about.

[Jilliandiz]

Thanks for the response, it definately clarified some things for me.

One more thing...for 2004:

Simple 401(k)

$9,000

$1,500

Whats the profit sharing limit....can a Simple go up to $41,000 also??

I thought something to the affect that they could only contribute a limit of like 3% to the employees in PS dollars.....am I totally wrong?

[Appleby]

Bear in mind-A SIMPLE cannot be maintained in the same year the employer maintains/ed any other plan, unless the other plan is for employees not covered under the SIMPLE- for instance, employees under a collective bargaining agreement . I.R.C. § 401(k)(11)©]

[Appleby]

Technically- it is not a profit sharing contribution. In SIMPLE 401(k), the employer may make either a matching contribution of $1 for $1 up to three percent of the employee’s compensation or a 2% non-elective contribution. The compensation cap ($200,000 for 2003/$205,000 for 2004) applies.