When can an employer terminate a SIMPLE IRA plan?
Other than initial establishment, SIMPLE IRA plans are maintained, or not maintained, on a whole-calendar-year basis. Once started for a year, a SIMPLE IRA plan must continue for the entire calendar year, funding all contributions promised in the employee notice. An employer may terminate a SIMPLE IRA plan prospectively, beginning with the next calendar year, after the employer has informed employees that there will be no SIMPLE IRA plan for the upcoming year. Example: If in 2007 an employer decides to terminate its SIMPLE IRA plan as soon as possible, the employer must inform employees within a reasonable period of time before the 60-day election period ending on December 31, 2007, that there will be no SIMPLE IRA plan for 2008. For 2008 the employer may establish and maintain another kind of qualified plan for its employees and, if this other qualified plan is not operative in 2009, re-establish a SIMPLE IRA plan for 2009.
