401k to SIMPLE rules

Submitted by Chris Caldwell on Thu, 2023-11-09 16:10

I have not been involved with a business closing down a 401k and wanting to implement a SIMPLE. They are working through TPA for the termination and CPA is asking me to start a SIMPLE with 1/1/24 effective date. Appears to clear out 401k, all employees will need to rollout to personal IRAs. If they want to roll those IRAs into a company sponsored SIMPLE in 2024, are they even allowed to do so per the two-year rollover SIMPLE rule? CPA wanted a direct rollover 401k to SIMPLE, but that is not possible. I will take any guidance from advisor who has worked through similar case in the past. Thank you!



Submitted by Alan - IRA critic on Thu, 2023-11-09 18:33

  • The 401k balance cannot be rolled into a SIMPLE IRA until 2 years has passed from the date of the first SIMPLE IRA contribution. Therefore, the terminated 401k balance must be rolled into a traditional or Roth IRA.  See the following chart:
  • Rollover Chart (irs.gov)

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