Switching from SIMPLE 401k to regular 401k

[J Simmons]

The advantage of a SIMPLE is to avoid ADP/ACP testing.

If a 401k plan starts a year as a SIMPLE may it be amendment mid-way through the year to remove the SIMPLE aspect, and ADP/ACP testing thus applies to the entire year? Can this be done without stripping the contributions made for the SIMPLE portion of the year of their tax deductibility?

Of course, the required SIMPLE contributions would have to be continued to the point in the year that the amendment takes effect (after the required 204h notice period).

[Gary Lesser]

No. The SIMPLE plan termination can take effect no sooner than the beginning of the following plan year. [see LRM on CODAs (page 31)]

Hope this helps.

[John Feldt ERPA CPC QPA]

The way the code or regulations are written, the adoption of a qualified plan invalidates the simple plan.