401k termination, starting SIMPLE

Submitted by ROTH CONV on Thu, 2023-09-14 01:19

I have only ever gone SIMPLE to 401k, but I have a client with low participation winding down 401k. We terminated the plan effective 9/30 and started a SIMPLE for 10/1. All coinciding with a change if payroll provider. I am reading that q4 should have no deferrals into the SIMPLE since there was a 401k in place during the calendar year (even though it was terminated). Any guidance on this? As a SIMPLE has no reporting (ie 5500) would this even come up as an issue?



Submitted by Alan - IRA critic on Thu, 2023-09-14 03:05

  • Per Notice 98-4 copied below:
  • “Q. B-3: Can an employer make contributions under a SIMPLE IRA Plan for a calendar year if it maintains another qualified plan? 4 A. B3: Generally, an employer cannot make contributions under a SIMPLE IRA Plan for a calendar year if the employer, or a predecessor employer, maintains a qualified plan (other than the SIMPLE IRA Plan) under which any of its employees receives an allocation of contributions (in the case of a defined contribution plan) or has an increase in a benefit accrued or treated as an accrued benefit under § 411(d)(6) (in the case of a defined benefit plan) for any plan year beginning or ending in that calendar year. In applying these rules, transfers, rollovers or forfeitures are disregarded, except to the extent forfeitures replace otherwise required contributions. For purposes of this Q&A B3, “qualified plan” means a plan, contract, pension or trust described in § 219(g)(5) and includes a plan qualified under § 401(a), a qualified annuity plan described in § 403(a), an annuity contract described in § 403(b), a plan established for employees of a State, a political subdivision or by an agency or instrumentality of any State or political subdivision (other than an eligible deferred compensation plan described in § 457(b)), a simplified employee pension (“SEP”) described in § 408(k), a trust described in § 501(c)(18) and a SIMPLE IRA Plan described in § 408(p). ” 


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