SIMPLE IRA to Safe Harbor 401(K)

[Lori H]

Can they maintain both plans and the Safe Harbor start up at any time? Or like converting a 401(k) to Safe Harbor 401, does the sponsor have to wait until the beginning of the plan year?

Thanks

[Guest mfitzgerald]

Can they maintain both plans and the Safe Harbor start up at any time? Or like converting a 401(k) to Safe Harbor 401, does the sponsor have to wait until the beginning of the plan year?

Thanks

It is my understanding that they would have to wait. It is the Simple rules that create the problem. If a sponser has a Simple plan the rules state that they may not maintain more than one plan in effect with their Simple. Also, Simples cannot be terminated until the end of a calendar year, and a 60 day notice must go out or the termination is not valid. Since you cannot terminate the Simple and you cannot have another plan at the same time, it appears to me that the safe harbor 401k is out.

[Gary Lesser]

If a safe-harbor 401(k) is adopted, the SIMPLE IRA fails to be a SIMPLE IRA and all SIMPLE IRA contributions would be treated as not made under a SIMPLE IRA; thus, the contributions would be treated as regular "wages." [iRV Sec. 408(p)(2)(D)]