SIMPLE IRA TO 401K
I have a self-employed client who has funded $10K into a SIMPLE IRA so far this year: $8K employee contributions with a $2K employer match.However, because she is having an outstanding year in her business, she would like to shelter as much as she possibly can. Can she stop funding the SIMPLE and now establish a solo 401k allowing her to fund up the maximum, including employer contributions? If so, I assume we must take into consideration what has been funded into the SIMPLE so far this year?
Permalink Submitted by Alan - IRA critic on Fri, 2016-10-14 18:07
Per Q B-3 of Notice 98-4 the SIMPLE IRA must be the sole plan that receives contributions in a calendar year. There are exceptions for collective bargaining employees, acquisitions and dispositions. Lacking one of these exceptions, the client will have to complete the 2016 funding of the SIMPLE IRA, terminate it in the annual notification for 2017 if there have been any employees that must be notified by 11/2/2016, and adopt a 401k plan effective 1/1/2017. She can make a TIRA contribution, but probably cannot deduct it due to having the SIMPLE IRA.