SIMPLE IRA Question
Hello,
A company set up a SIMPLE plan in 2023. They never made any contributions. Now they want to set up a SEP plan instead for 2023 and use the SIMPLE plan for 2024. Would this be allowed? Even though no SIMPLE contributions were made, I would think this would violate the one-plan rule required by the SIMPLE rules? The business owner thinks that the one-plan rules hinges on whether contributions were made and that they could technically keep both plans active and decide year to year which plan to fund and as long as both aren’t funded in the same year, it would be fine. Do you have any thoughts or feedback on this?
Thank you.
Permalink Submitted by Carol Redd on Tue, 2024-03-19 09:21
I cannot resist this urge to point out the irony of your “subject” line… Simple IRA question. I understand this is about a “Simple” IRA as opposed to a “SEP” IRA, but your question has gone unanswered for a good while and made me think to myself… There’s no such thing as a simple IRA question!
Off the top of my head, I would think since this is the owner of the company that is maintaining more than 1 plan, the answer would be that it could only work possibly once. The company could not flip-flop between the plans. Contributing to one in year one and then abandoning future contributions going forward in favor of the other plan might not technically be maintaining more than one plan. But, going back and forth, picking and choosing one over the other, seems to be violation of having only one plan.