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When can an employer terminate a SIMPLE IRA plan?

Last Updated August 30, 2011

Question: 

When can an employer terminate a SIMPLE IRA plan?

 

Answer: 

Except for the first year, when a SIMPLE IRA can be established in the middle of the year[1], a SIMPLE IRA must be maintained for the entire calendar year. As such, a SIMPLE IRA cannot be terminated mid-year. Instead, an employer who wants to terminate a SIMPLE IRA must terminate the plan ‘effective as of ‘January 1 of the following year.

 

Question Answered by Denise Appleby
 


[1] A SIMPLE IRA must be established by October 1. An exception applies to employers that come into existence after October 1. For these employers, the plan must be established as soon as administratively feasible.