Employer With SIMPLE IRA Wants To Add New 401(k) Plan

Although contributing to both a 401(k) and a SIMPLE IRA in the same year is not allowed, can an employer keep the SIMPLE account open if the only contributions made going forward are to the 401(k), or must they close the SIMPLE account before the 401(k) plan is started?

The SIMPLE money can remain in the IRA accounts established. For under 2 year accounts, I'm pretty sure it's required.

Thank you, Bill.  The 401(k) in question will be an owner-only 1-man plan.  If the owner's wife also has a SIMPLE IRA, do you know whether the wife can keep contributing to her SIMPLE IRA while the husband contributes to the 401(k)?  Each spouse owns a business but the businesses have nothing to do with each other, and each spouse is the only employee in their respective business.

1 hour ago, mming said:

Thank you, Bill.  The 401(k) in question will be an owner-only 1-man plan.  If the owner's wife also has a SIMPLE IRA, do you know whether the wife can keep contributing to her SIMPLE IRA while the husband contributes to the 401(k)?  Each spouse owns a business but the businesses have nothing to do with each other, and each spouse is the only employee in their respective business.

Your new fact pattern presents very important facts. While each spouse owns 100% of his/her respective business and "has nothing to do with each other", you would want to make sure that neither spouse has any sort of participation in the other company's affairs (e.g., sign off on certain situations). Because if they do, husband and wife's company would be deemed to be one company as a result of spousal attribution under the "controlled group rules." 

That's a very good point, Former Esq.  Would you happen to have any insight regarding whether or not the husband's 401(k) plan would prevent his spouse from contributing to her SIMPLE IRA?

If it's a controlled group, then the group can't sponsor a plan other than the SIMPLE (edited to say SIMPLE instead of 401(k)).

https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-simple-ira-sponsor-with-a-related-business

And if it's a controlled group and the spouses are the only employees in their businesses, it would be silly to not have them covered by a single 401(k).

It is not a controlled group.