Simple IRA rollover to a Qualifed Plan

[52626]

The employer had a Simple IRA Plan that was terminated.. The participants want to roll the funds into their new 401(k) Plan.

Normally a participant is prevented from rolling the funds to the an IRA or Qualified Plan, unless the participant was in the simple plan for 2 years.

Does the termination of the plan negate the 2 year period, allowing the participant with less than 2 years to roll to a traditional IRA or Qualified Plan?

If not, what happens to the accounts for the participants with less than 2 years? Do they remain under the Simple IRA even though the plan is terminated?

Thanks

[Guest Puff]

I believe the 2-year penalty still applies even if the distribution is being made because the employer terminated the SIMPLE IRA plan. I read somewhere that the 2-year penalty can only be avoided by keeping the SIMPLE account until the two-year window has passed, transferring to another SIMPLE IRA plan, or qualifying for a distribution exemption under specific guidelines.

[Bird]

Participants can just leave their SIMPLE IRA accounts where they are after the plan is terminated. If they choose to move the money - anywhere except to another SIMPLE IRA account - within two years, they are subject to the penalty.