Want to Upgrade Your SIMPLE IRA to a 401(k) Plan in 2024? The Deadline is Now

September 6, 2023|Parker Elmore

Someone sitting at a desk with a glass timer in front of them

If you’d like to move to a 401(k) for 2024, you must notify employees by November 2nd, 2023. 

As your business or that of your clients has grown, you may be thinking it’s time to upgrade your retirement plan from a SIMPLE IRA to a 401(k) Plan. The issue is that you can’t switch mid-year as IRS rules don’t allow for it. So, if you’re certain that you’d like to move to a 401(k) for 2024, you’ll need to notify all SIMPLE-IRA participants by November 2nd. Here’s a link to the IRS site showing how to terminate a SIMPLE IRA.

How to Terminate Your SIMPLE IRA?

To terminate your SIMPLE IRA and upgrade to a 401(k) plan for 2024, you’ll need to follow a couple of steps. Here’s a general guideline on how to go about it:

  1. Notify Employees: If you have employees who are participating in the SIMPLE IRA, you must inform them about your decision to terminate the plan. The IRS requires that you provide a 60-day notice before the end of the calendar year, which would be November 2nd, 2023.
  2. Provide Notice to Financial Institution: Notify the financial institution that manages your SIMPLE IRA of your intention to terminate the plan at the end of the year. They will guide you through the process of closing the account.

If you’d like a SAMPLE termination notice to send to your employees, we have one available for download here.

Good to note: You do not need to notify the IRS that you’ve terminated your SIMPLE IRA plan.

You can work with your financial professional to determine the appropriate 401(k) Plan design & provider before year-end to maintain continuity without the constraint of an IRS deadline. Be aware, if you’d like it to be a “safe harbor” plan similar to the SIMPLE-IRA, that does have a December 1st notice date to employees.

As always, if you have questions on this or need more, please contact an Odyssey consultant.

Categories: 401(k), IRA, Pension, Retirement, Taxes