Simple & 401(k) in same Plan Year?

[CJS07]

Not sure if this is the right area to ask this but here goes. Can a Co. have a Simple Plan at the beginning of 2011 and have employees contribute to the Simple & then start a 401(k) Safe Harbor Non-Elective Plan in 2011? The employees deferred 401(k) and Roth for 2011 to the new 401(k) Plan. I always thought it was one or the other (simple OR 401(k)) within a Plan year. . . .

[ETA Consulting LLC]

I always thought it was one or the other (simple OR 401(k)) within a Plan year. . . .

You've always thought correctly. The SIMPLE IRA has an exclusive plan requirement that states it must be the only plan of the employer during the calendar year. Now that you've funded a 401(k) and a SIMPLE IRA, you would have disqualified the SIMPLE IRA for the year (and corrective measures should be taken to fix this). There really wouldn't be any impact to the 401(k).

Good Luck!