Converting from a SEP to a Simple IRA

I'll be honest, I don't have much experience in this area but I have someone asking me questions.  Someone wants to change their SEP to a Simple IRA.  Are there any issues with doing this and can they still contribute to the Simple IRA? 

They are separate animals, but both vehicles for getting money into an IRA(s) - with different documents and different accounts. A SEP has optional contributions so you can just stop making contributions, and set up a new SIMPLE. There is a general prohibition on making SIMPLE contributions in the same year as any other plan, except when you start a SH 401(k), but that doesn't seem to apply here. I don't understand the question about "still" contributing to the SIMPLE when that is the new plan.

If SEP contributions have been made for the 2024 CY, then a new" SIMPLE IRA/Roth plan will have to wait until next year. [I.R.C. § 408(p)(2)(D)]

For 2024, the SIMPLE limit is $16,000 (but increased to $17,600. (SECURE 2.0, §117)

Also, additional non elective SIMPLE contributions now permitted up to 10% of first $345k of compensation (not to exceed $5,000). (SECURE 2.0, §116)

Next year, additional SIMPLE catch-up contributions allowed if age 60, 61, or age 62. (SECURE 2.0, § 109)

Existing model and prototype plans may be used for all of the above (prior to updating and amendment). [I.R.S. Notice 2024-2]

If client has been maintaining both a SEP and a SIMPLE IRA/Roth, then client has some problems.

Participation in either plan generally results in "active participation" status. Subject to AGI limits, client could still contribute to an IRA or Roth IRA, or a nondeductible IRA. With most trustees/custodians, the same IRA can be used to receive "annual" contributions.

I assume you meant contributions are or were were being made to SEP

Hope this helps. 

~~Gary