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Can I terminate my SIMPLE IRA Plan in mid-year?

Last Updated July 3, 2009

Question: 

Times are tough and I can no longer afford to make contributions to my employees SIMPLE IRAs. Can I terminate the Plan during the middle of the year?

Answer: 

Unfortunately, you cannot terminate your SIMPLE IRA Plan or choose to suspend contributions in the middle of the year, regardless of the financial status of your business.  According to the IRS, SIMPLE IRAs cannot be maintained for less than a full calendar year, except in cases where a new SIMPLE IRA is established after the beginning of the year.  As such, you must make the contributions which were promised to your employees when you provided them with the notification. For information about this notification requirement, see our Tutorial: SIMPLE IRA Notification and Administrative Requirements.

For more on SIMPLE IRAs, see our SIMPLE IRA Tutorial