Client has had a SIMPLE IRA in place for several years. So far in 2012 one employee has contriubed the grandiose amount of $400.

Client now wants to adopt a qualified plan for 2012 which automatically disqualifies the SIMPLE for 2012 (prior years are fine)

I’m seeking confirmation that this is what we need to do:

Employer should NOT deposit the $400 matching contriobution otherwise required under the terms of the SIMPLE

Employee should withdraw the $400 “excess contribution” before 4/15/2013 to avoid the 6% excise tax

Withdrawal is taxable but not subject to the 25% early distribution penalty since it’s a “correction”

Sound right and anything else to worry about?

Thanks