Terminated 401(k) Plan and New SIMPLE IRA Plan

[Guest PhDay]

What are the distribution options for a 401(k) Plan that terminates 12/1/2010 and establishes a SIMPLE IRA effective 1/1/2011?

Dilema: I understand that when there is a successor plan (the SIMPLE IRA in this case), the 401(k) funds must be transferred into the successor plan. But what are the options when the SIMPLE IRA (successor plan) does not accept a direct transfer of assets from a 401(k) Plan?

[KJohnson]

I think you can just distribute check the last sentence of what is pasted below from the (k) regs....

Rules applicable to distributions upon plan termination--(i) No

alternative defined contribution plan. A distribution may not be made

under paragraph (d)(1)(iii) of this section if the employer establishes

or maintains an alternative defined contribution plan. For purposes of

the preceding sentence, the definition of the term ``employer''

contained in Sec. 1.401(k)-6 is applied as of the date of plan

termination, and a plan is an alternative defined contribution plan only

if it is a defined contribution plan that exists at any time during the

period beginning on the date of plan termination and ending 12 months

after distribution of all assets from the terminated plan. However, if

at all times during the 24-month period beginning 12 months before the

date of plan termination, fewer than 2% of the employees who were

eligible under the defined contribution plan that includes the cash or

deferred arrangement as of the date of plan termination are eligible

under the other defined contribution plan, the other plan is not an

alternative defined contribution plan. In addition, a defined

contribution plan is not treated as an alternative defined contribution

plan if it is an employee stock ownership plan as defined in section

4975(e)(7) or 409(a), a simplified employee pension as defined in

section 408(k), a SIMPLE IRA plan as defined in section 408(p), a plan

or contract that satisfies the requirements of section 403(b), or a plan

that is described in section 457(b) or (f).

[Guest PhDay]

Thank you. This is very helpful.