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401k termination, start SIMPLE


CDA TPA

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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.

 

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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.

William C. Presson, ERPA, QPA, QKA
bill.presson@gmail.com
C 205.994.4070

 

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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?

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