Terminating a SIMPLE.

[Guest Thornton]

I have a potential client on 10/31 fiscal year. The company has a SIMPLE Plan . It wants to terminate it and start a P/S effective 11/01/98.

Can he? Can a SIMPLE be terminated prior to its 12/31 y/e?

[Gary Lesser]

Any amendment that is inconsistant with the notice (previously given for the year) does not become effective until the following year. Thus, in all likelyhood, the amendment cannot be effective util the new year beginning in 2000. If the P/S plan is adopted, effective 11/98, then the 1998 (and 1999)SIMPLE is no longer valid; all SIMPLE contributions are excess contributions and no amount contributed to the SIMPLE is (was) deductible. The SIMPLE becomes a COMPLEX!