New SIMPLE PLan for 2012

[rfahey]

I have a dentist with a profit sharing plan who will be terminating the plan in the next year.

He will not be making a contribution for 2012.

I had him execute a SIMPLE plan and distribute the required notices by October 1, 2012. He will be making a 2% non elective contribution for him and two emplolyees for 2012. He is self empllyed so will me making a salary deferral contribution for himself for 20112 in 2013 before he files his taxes.

Does this all sound correct to do ?

THank you!

[ETA Consulting LLC]

Yes, just be sure that his deferral is made in January. Unlike Qualified Plans (that give you more time until your income is actually calculated by your accountant), SIMPLE IRAs have a hard-fast 30 day rule for deferrals.

Good Luck!

[Jim Chad]

Do I understand he is going to have both a profit sharing plan and a SIMPLE Plan in existence in 2012 and part of 2013? Isn't that a problem even if he does not contribute to the Profit Sharing plan?

[Belgarath]

Shouldn't be a problem IF no allocation under the PS plan based upon 2012 service/comp. Quick excerpt from the 5404 form below. Also note that forfeitures do NOT count unless they replace otherwise required contributions.

"You do not maintain during any part of the calendar year another qualified plan with respect to which contributions are made, or benefits are accrued, for service in the calendar year...."