Switch to SIMPLE 401(k)

[R. Butler]

Employer has a calendar year 401(k) Plan. Can the employer amend to a SIMPLE 401(k) mid-year and avoid a top heavycontribution? I believe the answer is "no", any amendment would be effective the following January, but I am not positive.

[wmyer]

No, they would have to adopt it 1/1/2002. Revenue Proc. 97-9, Section 2.08: "Employers amending an existing 401(k) plan to incorporate the model amendment must make the model amendment effective as of the following January 1 unless they are using the 1997 Transition Rule...." If they didn't have an existing 401(k) arrangement, they could have an initial short plan year, with the SIMPLE plan effective 10/1/2001.