Rollover From Simple IRA

[Guest esi-jht]

Client had a Simple IRA but is moving to a 401k s/h plan. They want to roll some of the SIMPLE IRA money into the new 401k. If they do this, do those rollover monies get counted toward TH determination in the new 401k plan?

[WDIK]

Step 1: Determine if the two-year period for SIMPLE IRA's has been met.

Step 2: Determine whether the rollover is related or unrelated. (See Treas. Reg. § 1.416-1 Q T-32)

[Guest esi-jht]

The SIMPLE is definitely related as it was sponsored by the same ER as the new 401k. I was wondering/hoping that since it was a SIMPLE plan (top heavy rules do not apply to simple, correct?) that it would not have to be added to balances and factored in when determining if the new 401k plan is TH.

[Belgarath]

I agree that is reasonable to not include the SIMPLE-IRA rollover in the TH determination.

Sal Tripodi makes reference to an ASPPA conference in 2001 (Q&A-31) where the IRS representative said it should be treated as an unrelated rollover. I'm not aware of any additional guidance on this subject.