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SIMPLE IRA and 401k in acquisition


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Company A sponsors a SIMPLE IRA. Company A has been purchased by Company B through a stock purchase. Company B sponsors a safe harbor 401k plan. Company A will continue to maintain the SIMPLE IRA for its employees through the end of this year and then give notice that the SIMPLE IRA will cease 12/31/2011. For the employees of Company A who have not satisfied the two year requirement to rollover their SIMPLE IRA to the 401k plan, can they just keep their money in the SIMPLE until two years is up? In other words, does the clock continue to tick on the 2 year requirement even when the SIMPLE IRA is not actively receiving any contributions?

Additionally, the 2 year requirement does not apply to employees over age 59.5, correct?

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Regarding your second question, if one of the exceptions to application of the tax under §72(t) applies (e.g., for amounts paid after age 59 1/2, after death, or as part of a series of substantially equal payments), the exception also applies to distributions within the 2-year period and the 25-percent additional tax does not apply.

Regarding your first question I am not entirely sure, but I believe the clock would continue to tick regardless of no contributions being made.

PensionPro, CPC, TGPC

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