401k termination, start SIMPLE

[LMK TPA]

My client has a non-safe harbor 401k plan.  They want to terminate it and start a SIMPLE IRA.  I know SECURE 2.0 allows a SIMPLE to be terminated mid year and start a 401k plan, but is the reverse true?  Can a non-safe harbor plan be terminated mid year and start a SIMPLE mid year?  

Is a 60 day notice of termination required?  I have a Q&A from TAG saying that an advance notice of plan termination is not required (even if the plan is a safe harbor 401k plan.)  Is that true?  I know TAG isn't official legal advice but they're a pretty decent source of information.

 

[Bill Presson]

You don't need a 60 day notice, just 30 days for a SH plan and no time frame for a non-safe harbor plan but we try to do 15 days at least. You will need to give notice for starting the SIMPLE. At this point, I would terminate the 401(k) 12/31/2023, pay it out in 2024 and start the SIMPLE 1/1/2024.

[CuseFan]

agreed - and you cannot do the 401(k) term/SIMPLE start-up in same year.

[LMK TPA]

On 11/14/2023 at 6:24 AM, Bill Presson said:

You don't need a 60 day notice, just 30 days for a SH plan and no time frame for a non-safe harbor plan but we try to do 15 days at least. You will need to give notice for starting the SIMPLE. At this point, I would terminate the 401(k) 12/31/2023, pay it out in 2024 and start the SIMPLE 1/1/2024.

Thank you!  If 401k accounts are not distributed by 12/31/2024 but the plan officially terminated, can the SIMPLE still start on 1/1/2024?

[Bill Presson]

12 minutes ago, CDA TPA said:

Thank you!  If 401k accounts are not distributed by 12/31/2024 but the plan officially terminated, can the SIMPLE still start on 1/1/2024?

I assume you mean 12/31/2023, but yes.

[LMK TPA]

14 hours ago, Bill Presson said:

I assume you mean 12/31/2023, but yes.

oops!  Yes, 2023.  Thank you!