Corporate termination of 401k and immediate opening of Simple IRA
does the 12month waiting period apply here? Corporation wants to terminate 401k by Dec 31 2016 and open Simple IRA Jan 1 2017. Do they have to wait 12 months? getting conflicting info.
And, it looks like the 401K proceeds must be distributed to each employee, and they cannot role that into the Simple IRA plan, any rollover must be don’t by each individual to their own IRA or perhaps another 401K . Is that correct?
Appreciate any feedback
thank you
David
Permalink Submitted by Alan - IRA critic on Mon, 2016-11-28 22:42
Other types of non Roth retirement plans cannot be rolled into a SIMPLE IRA until 2 years has passed from the date of the first SIMPLE IRA contribution. Perhaps the 12 month waiting period you are referring to relates to not being able to provide the required 60 day Notice to employees regarding their election to participate in the SIMPLE IRA if the SIMPLE was to start 1/1/2017. Since this employer did not have a SIMPLE IRA previously, they can start the SIMPLE IRA or any date, but still must provide the 60 day advance Notice. For example, if the Notice were to go out today, the SIMPLE IRA could start on 1/27/2017, not sooner. In other words, the employer should have started over a month ago if they wanted to start for calendar year 2017, since the election notice would have had to be mailed by 11/2 to meet the 60 day requirement. If they want to start on January 1, at this point it will have to be 1/1/2018.
Permalink Submitted by David Castelli on Tue, 2016-11-29 02:01
i think the 60 day notice may be the issue…will check on it. if that is so 60 days from tomorrow is better than 2018As always, appreciate the help
Permalink Submitted by William Tuttle on Tue, 2016-11-29 02:27
There is a successor plan rule that prohibits another defined contribution plan within 12 months after distribution of the assets of the terminated plan. However, this rule does not apply a SIMPLE IRA as the successor plan. So, the only restriction is the 60 day notification period identified by Alan.
Permalink Submitted by David Castelli on Tue, 2016-11-29 15:56
thank you!