calexbraska Posted March 20, 2018 Report Share Posted March 20, 2018 We are a small employer with a SIMPLE IRA. We are being acquired through a stock transaction by a larger company with a 401(k). Can we continue to maintain the SIMPLE IRA as a frozen plan (no future funding) or are we required to terminate it by the end of the 2 year transition period? If we terminate the SIMPLE IRA, what are the tax consequences? Link to comment Share on other sites More sharing options...
Griswold Posted March 20, 2018 Report Share Posted March 20, 2018 Does the acquiring company have any sort of qualified plan (like a 401(k) plan)? Link to comment Share on other sites More sharing options...
calexbraska Posted March 20, 2018 Author Report Share Posted March 20, 2018 Yes, they have a 401(k). I think I've figured this out. The client was worried that terminating the plan would have negative tax consequences. However, termination doesn't trigger distributions in the case of a SIMPLE IRA, so I think we're just going to terminate the SIMPLE IRA and let participant's have the choice of taking a distribution, doing a rollover, or just leaving their money in their accounts for now. Link to comment Share on other sites More sharing options...
Luke Bailey Posted March 21, 2018 Report Share Posted March 21, 2018 There is a grace period until the end of the next plan year when the target could continue to maintain the SIMPLE for its legacy employees. See IRC sec. 408(p)(10). I don't think you can terminate it before the end of the year. See https://www.irs.gov/retirement-plans/terminating-a-simple-ira-plan. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
calexbraska Posted March 21, 2018 Author Report Share Posted March 21, 2018 Thanks Luke. Duly noted. Link to comment Share on other sites More sharing options...
Luke Bailey Posted March 22, 2018 Report Share Posted March 22, 2018 Good luck, calexbraska. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
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