SIMPLE IRA – Can the employer have two active plans for one company?

Submitted by Susan Marki on Fri, 2020-10-16 20:04

I have a client who opened up SIMPLE IRA plans with me in September. Their existing SIMPLE custodian is expensive and has bad options, but is plugged into their current payroll system, which they do not want to change.

Can the employers / employees continue to deposit funds into their current SIMPLE accounts and then transfer their contributions regularly to their new SIMPLE accounts (with a better custodian) without running into problems? In other words, can the employer sponsor two SIMPLE IRA plans at the same time as long as they follow the contribution rules for just one SIMPLE plan?

Thank you.



Submitted by William Tuttle on Fri, 2020-10-16 22:56

  • An employer can only set up a SIMPLE IRA plan effective on any date between January 1 and October 1, provided they (or any predecessor employer) didn’t previously maintain a SIMPLE IRA plan. Not to mention, you can’t contribute to a SIMPLE IRA plan for a calendar year if you maintain any another retirement plan.
  • You can not change SIMPLE IRA plans mid-year. You can only change SIMPLE IRA plans on 1/1 of the next year provided you have adopted the plan to be effctive 1/1 and will meet the current year 11/2 notification and enrollment deadline.
  • This can easily be corrected by amending the adoption agreement effctive date to 1/1/21.
  • Bottom line: No contributions can be made to the new custodian until 1/1/21.
  • I am not sure, but believe all employee deferrals and employer contributions for 2020 deposited after 12/31/20 might still need to be deposited with the current custodian. Since each employee owns their SIMPLE IRA account, they can and are responsible to rollover the balance to the new custodin. 

Submitted by Susan Marki on Mon, 2020-10-19 17:04

Thank you!!  Because of your response I was able to understand the IRS publications that I couldn’t beforehand.   My clients are clear on the 2-year rule, so I can get them what they want, but just a different way.  They can continue on with their current SIMPLE accounts.  I can then make regular custodian-to-custodian transfers from their current SIMPLE to their own individual IRAs (and not to another SIMPLE).

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