SIMPLE termination

[Guest LTurner]

Employer has had a SIMPLE IRA plan in place for a number of years (more than 2), and due to economic pressures in their business they cannot afford to continue the plan. What must they do to terminate the plan? Is it simply employee notification with a specified date? Does this need to be 60 days?

please advise....

[austin3515]

Take a look at a similar post which as of right now is immediately below this one!

Courtesy of BTG.

http://www.irs.gov/retirement/article/0,,i...tml#termination

I was having trouble with the link, so here it is:

When can an employer terminate a SIMPLE IRA plan?

Other than initial establishment, SIMPLE IRA plans are maintained, or not maintained, on a whole-calendar-year basis. Once started for a year, a SIMPLE IRA plan must continue for the entire calendar year, funding all contributions promised in the employee notice. An employer may terminate a SIMPLE IRA plan prospectively, beginning with the next calendar year, after the employer has informed employees that there will be no SIMPLE IRA plan for the upcoming year.

Example: If in 2007 an employer decides to terminate its SIMPLE IRA plan as soon as possible, the employer must inform employees within a reasonable period of time before the 60-day election period ending on December 31, 2007, that there will be no SIMPLE IRA plan for 2008. For 2008 the employer may establish and maintain another kind of qualified plan for its employees and, if this other qualified plan is not operative in 2009, re-establish a SIMPLE IRA plan for 2009.

[jlea]

Yes, and if an employer tries to terminate its SIMPLE IRA sometime other than at the conclusion of a calendar year, it results in an operational error that must be corrected. EPCRS applies to SIMPLE IRAs as well (at least the IRA charges lower VCP fees for them).