The adage “timing is everything" couldn't be more relevant when it comes to making a change to your company's retirement plan. While changing from one 401(k) provider to another can generally occur at any point during the year, SIMPLE IRA plans have a stricter set of rules to follow.
SIMPLE IRA plans are a great option for many agencies. They are easy and inexpensive to set up and operate, they don't require discrimination testing, and there are no annual filings required.
But that simplicity comes with stringent guidelines/limitations. Loans are not permitted, there is no ability for ROTH deferrals, and overall employee deferrals are lower than traditional qualified plans.
Additionally, SIMPLE IRAs are designed to operate on a calendar year and cannot be terminated early. Once started, a SIMPLE IRA must continue funding all promised contributions for the entire calendar year.
If you've outgrown your SIMPLE IRA plan or simply want to change to a 401(k) plan, your window of opportunity is upon you, as you can only terminate you SIMPLE IRA plan at year-end.
If you intend to terminate your plan, you are required to provide a simple notice to your employees within a reasonable time before Nov. 2. If you intend to continue your SIMPLE IRA plan, don't forget to supply your employees with the required annual notice by Nov. 2, informing them of the plan parameters for the upcoming year.
Interested in information on Big “I" retirement plans? Contact Christine Muñoz or visit Big “I" Retirement Services online for more information.