Converting a Simple IRA to a Safe Harbor 401(k)

[mlp0816]

I have a client that has operated a Simple IRA plan for the past 14 years. He would like to take advantage of larger deferral opportunities and other perks of a Safe Harbor 401(k).

Can the simple IRA be converted to a Safe Harbor Plan?

Can dollars currently held if the Simple IRA be rolled over to the SH Plan without restrictions (since it's been in operation for 14 years)?

Can the safe harbor plan start at any point or is there a deadline?

Thanks in advance!

[ETA Consulting LLC]

No. It would, likely, be easier to continue the SIMPLE IRA throughout the remainder of 2014 and start the Safe Harbor 401(k) with an effective date of January 1, 2015. Each participant in the SIMPLE IRA will have total control over their individual accounts. So, for 401(k) purposes, don't anticipate a transfer.

Obviously, there are limitless sets of circumstances where one thing or another may happen, but this is likely your most streamlined method.

Good Luck!

[mlp0816]

Thank you.. so if I create a SH Plan effective January 1, 2015, (the bulk of the dollars are held by the 3 individuals that want to utilize the SH 401(k)...... can they roll their balances over into the SH plan, since they have had the account for 14 years? or can they only roll over the portion that was contributed prior to 2 years ago? That's were I'm hung up...

[K2]

The two year period on the excise tax starts when the Simple IRA is first funded, so all of the account balance can be rolled over to the 401k.

Don't forget to notify the employees and IRA custodian that the Simple is being discontinued. I think the deadline for doing that is November 2nd.

[GMK]

where "doing that" is giving the notice, yes?