Terminating a 401k and starting a Simple IRA

[Guest LSULLIVAN]

401k wants to terminate 12/31/07 and start a simple ira starting 2008. Can assets be rolled from the K to the simple? Can a plan liquidate the entire k plan, complete testing and filing for the final year and be done with it or do they have to go thru a termination process with the IRS? I get different responses from different TPA's.

Thank you in advance for any advice.

[jevd]

401k wants to terminate 12/31/07 and start a simple ira starting 2008. Can assets be rolled from the K to the simple? Can a plan liquidate the entire k plan, complete testing and filing for the final year and be done with it or do they have to go thru a termination process with the IRS? I get different responses from different TPA's.

Thank you in advance for any advice.

I can't address the termination of the plan, but SIMPLE IRA funds must remain pristine in a SIMPLE IRA Account. No other contributions of non-SIMPLE IRA funds are allowed. Funds from the terminated 401(k) plan could be rolled over into Traditional IRAs or other types of plans if the receiving plan language allowed.

Funds from other SIMPLE IRA Accounts may be transferred or rolled over into a SIMPLE IRA however.

[Kimberly S]

The IRS filing is optional as far as the IRS is concerned. Some TPAs require that their clients do it. It is very expensive and time consuming, but can be worthwhile depending on the plan and the client's situation.

[dmwe]

Would normal termination distribution options apply then for the 401k money? Participants could take the taxable distribution or roll over?