Order of disqualification

[rcline46]

I took a look at 1.415(g) on plan disqualification to try to guess what happens if a qualified plan is established during a year in which a SIMPLE 401(k) exists.

One section says the employer chooses which plan goes out first, but another section says if a simple plan exists, it goes last (that is, the qualified plan is disqualified first!)

Is this the general understanding? I know there was a thread on this a while ago, but my search criteria was of no help in finding it. Bad (too general) keywords I think.

Thanks all.

[Bird]

My own "general understanding" was that SIMPLE contributions were disqualified. I'm not quite sure but I don't think a disqualification for 415 violations is the same as a disqualification for having two plans exist in the same year when one is a SIMPLE.

[PensionPro]

I believe the SIMPLE contributions are treated as excess and reported on box 1 of W-2. This seems to mean the SIMPLE contributions go out first. I don't have a cite, but that is my understanding.

[Belgarath]

I think maybe you are confusing a SIMPLE with a SEP? I agree that 1.415(g)-1(b)(3)(iv)(A) provides for he disqualification of the non-SEP first, as you mention, but a SIMPLE 401(k) is treated the same as any other DC plan for these purposes. Which eans, I think, that employer chooses, and if the employer doesn't choose, the Commissioner chooses.

[rcline46]

I think that Belgarath is correct. The regulation under (g) states a 'simplilfied' plan which would refer to a SEP and not a SIMPLE.