Amending 401(k) to SIMPLE 401(k)

[R. Butler]

Suppose employer has a 06/30 fiscal year end 401(k) plan. Employer wants to amend to a SIMPLE 401(k). Can employer amend to SIMPLE 401(k) effective 07/01/08 & make a short plan year from 07/01/08 and make a short year from 07/01/08 through 12/31/08? The exclusive plan requirement throws me with the SIMPLE 401(k); although this an amendement to an exisitng plan, I want to be certain that for exlcusive plan purposes this really isn't looked at as 2 separate plans, a regular 401(k) and then a SIMPLE 401(k).

(I know employer can amend to a short year now & then adopt a SIMPLE 401(k) effective 01/01/08, but employer may not want to do that.)

Thanks in advance for any guidance.

[MSN]

1.410(k)-4(g) stipulates that the plan year of a SIMPLE (k) must be the entire calendar year. Your client doesn't have an option if they want the SIMPLE.

[R. Butler]

1.410(k)-4(g) stipulates that the plan year of a SIMPLE (k) must be the entire calendar year. Your client doesn't have an option if they want the SIMPLE.

It goes on to stipulate "...However, in the case of an employer that did not previously maintain a SIMPLE 401(k) plan, the establishment date can be as late as October 1."

In my hypotehtical the plan isn't currently a SIMPLE 401(k). The plan year would be amended to the calendar year. I'm just not clear whether a SIMPLE can be done for the the short year from 07/01 - 12/31.

Thanks

[MSN]

I would not consider the addition of a SIMPLE provision the same as the establishment of a new plan, but I suppose this could be open to interpretation.