Ok to terminate 401k and establish simple IRA orSimple 401(k)?

[pbarrett]

We have a client who would like to terminate their 401(k) plan and establish either a simple IRA or simple 401(k) this year. Is there any waiting rule (successor plan rule)? Do the participant funds have to be transferred to the Simple?

[alanm]

The simple IRA plan is not regarded as a successor plan for the 1 year wait; however, there is a rule you can't contribute to a 401k and a simple IRA plan in the same year. So to stop a 401k now means you can't do a simple until 1/1/05