Termination of SH Matching plan to convert to SIMPLE IRA

[GwenOC]

I'm guessing that this has already come up on the forum.  I have a plan that is a SHMC plan.  The employer wants to terminate the SHMC plan and set up a SIMPLE IRA plan in 2025.  

Secure allows the employer go SIMPLE to SH, but I can't determine if they can go the other way.  

I'm concerned about the 12 month moratorium rule for the 401(k) plan. 

[Lou S.]

No you can't establish a SIMPE-IRA if you maintain another qualified plan. I'm not 100% certain but i think that is maintain at anytime during the year so even if they terminate the SH Match plan, I don't think they can start a Simple-IRA until 2026 but it's possible I'm wrong on that. SIMPLE-IRAs aren't something I deal with much.

The "best" way to do it would be to terminate the SH 401(k) effective 12/31/25 and establish the SIMPLE-IRA 1/1/26 (for a variety of reasons).

If the "cost" of the SH match is the problem they could terminate the plan or eliminate the SH match, with 30 days notice to employees, but they'd be subject to ADP/ACP for 2025 and if the Plan is TH they would not get the "deemed not top-heavy" exemption.

 

 

[GwenOC]

Thank you for your input.

 

[EBP]

On 4/8/2025 at 3:41 PM, Lou S. said:

 

If the "cost" of the SH match is the problem they could terminate the plan or eliminate the SH match, with 30 days notice to employees, but they'd be subject to ADP/ACP for 2025 and if the Plan is TH they would not get the "deemed not top-heavy" exemption.

 

 

And remember that in order to eliminate the SH match by giving employees a 30-day notice, the language allowing the employer to do so must have been in the safe harbor notice for the year.

[GwenOC]

Thanks