Terminate a PS to start a SIMPLE

[Guest jetfaninmn]

Can a company terminate their PS plan (1 life) on June 30, 2005 and begin a SIMPLE on 7/1/05?

I'm just full of questions today.

[Gary Lesser]

Yes, provided the business's tax year ends on June 30th. Assume CY, but NO contributions have been made to the P/S plan for the 2005, still possible. In other cases, no. [No overlapping contributions for CY under the exclusive plan rule.] Hope this helps. [Ooops, see clarification below)

[Appleby]

Gary,

I may be misunderstanding the rules, but I though the answer would be no-for 2005...because the plan year ended in calendar year 2005. Your thoughts?

[Gary Lesser]

Appleby, you are probably correct as a SIMPLE IRA must be maintained on a CY basis and the periods would overlap. So, assuming the PS plan was maintained for the PY ending in 2005, 2006 would be the first year that a SIMPLE IRA cd be maintained. OTOH, if no contributions (other than rollover, transfers, and forfeitures that do not replace required contributions) were made to P/S plan for the PYE in 2005 then a SIMPLE could be maintained for 2005. [Notice 98-4, Q&A B-3l