SIMPLE IRA for 2020 - too late to stop and replace with 401(k)?

[lisabroc]

Is there any possibility that SIMPLE IRA deductions can be reversed in January so that it can be replaced by 401(k) for 2020?

I know the rule that both can't be maintained the same year. However, does the employer really need to wait another year to put in a plan with higher contribution benefits? Is there a fix or way to correct? Seems like it could still be done this early in the year.

[Bird]

They can't be reversed but they can be invalidated by adopting a new plan.  (I think) they become regular IRA contributions at that time, subject to regular IRA rules.  I'm not really sure if that means the W-2 should not reflect the contributions or what, it's all theoretical to me as I've never done it.  

[Larry Starr]

21 hours ago, lisabroc said:

Is there any possibility that SIMPLE IRA deductions can be reversed in January so that it can be replaced by 401(k) for 2020?

I know the rule that both can't be maintained the same year. However, does the employer really need to wait another year to put in a plan with higher contribution benefits? Is there a fix or way to correct? Seems like it could still be done this early in the year.

I've done this many times.  Once you adopt the 401(k), the SIMPLE is no longer a good plan.  Stop contributions immediately.  You can reverse the salary deductions and the employer will have to pay the funds to the employees.  The contributions will then become voluntary contributions to an IRA for 2020.  Since I assume no one is over the IRA limit yet, you don't have to worry about excess contributions to an IRA which can be fixed using the stated process for excess IRA contributions.

[lisabroc]

Thank you very much, Larry!