Understanding the differences between retirement programs is key to ensuring the benefit offered is best serving the needs of the employer and their employees. Could it be time to transition away from the SIMPLE IRA plan?
Employer Considerations
- Are you looking to increase contributions for yourself and your employees?
- Is custom plan design important? Or the ability to delay an employer contribution?
- Do you want the ability to choose investment options from multiple funds families?
- How important is having a vesting schedule?
- Do you want to offer loans as a plan feature?
- Are paying some or higher administrative costs a challenge?*
Why 401(k)?
- Employer contribution not mandatory, flexibility year to year
- Flexibility with custom plan design
- Can qualify for enhanced tax credit
- Flexibility with vesting provisions for employer contributions
- Plans allow for loans and hardships
- Plan level pricing and reporting
Curious how to transition from SIMPLE IRA to 401(k) plan?
SIMPLE IRA’s can only be transitioned to 401(k) plans with an effective date of January 1st of the next calendar year
Here is a sample timeline of the process:
- Plan design customization — eligibility, enrollment periods, company match, vesting schedule, etc.
- Notices sent to participants regarding terminating the SIMPLE IRA and establishing the 401(k) plan 60 days prior to termination
- If Safe Harbor design, notices for Safe Harbor sent before start of plan year
- Individual accounts in the SIMPLE IRA rolled over into the 401(k) plan
- On January 1st, plan goes live
*Generally, SIMPLE IRA setup & administration costs are lower than a 401k. Relevant for producers and plan sponsors.
