Correction of SIMPLE via Streamlined VCP

[Guest A125]

Has anyone used the Streamlined VCP Appendix F, Schedule 4 to correct an ineligible employer's sponsorship of a SIMPLE IRA? Specifically, Employer became part of a controlled group via stock purchase in 2004. One entity has a profit sharing plan. The other has a SIMPLE IRA. I know about the 2-year tranisition period following an asset sale, but we are beyond that time.

My question is.....the Streamlined VCP application gives the proposed correction method of simply ceasing all SIMPLE contributions. There is an option to ask the IRS to approve retaining the SIMPLE money in the IRA accounts rather than distributing as excess. Has anyone been successful with this?

Also, the other entity has a profit sharing plan. The employer either wants to: (1) terminate the PSP and put everyone under the SIMPLE, or (2) terminate the simple and add everyone under the PSP - maybe convert to a 401(k) safe harbor. I know option one would have been available during the transition period, but that is gone. If they elect option two, do they have to wait until the beginning of the year to add the employees to the PSP. Since the SIMPLE would be terminated as a matter of law, it may be allowable if the PSP allows. Any thoughts?

Thanks!