I was wondering if anyone is going to be implementing the below provision and how they are going to be handling the value for the weighted contribution limit in OMNI DC (bold bullet point below)?
Mid-Year Termination of SIMPLE. SECURE 2.0 provided employers an option to terminate a SIMPLE plan mid-year if a safe harbor 401(k) plan is adopted to replace the plan. Guidance on this provision includes:
- Termination Process: An employer terminates a SIMPLE IRA plan by formal written action specifying the termination date. No salary reduction contributions are allowed for compensation paid after the termination date. The Employer must still make matching contributions based on compensation through the termination date.
- Notification Requirements: Employers must notify employees at least 30 days before termination, specifying the end of salary reduction contributions.
- Distribution Rollover: Distributions, even those within the first two years of participation, may be rolled over to a 401(k) or 403(b) plan.
- Exception of Other Plan Rule: Establishing a safe harbor plan is an exception to the rule prohibiting both a SIMPLE IRA plan and another plan in the same calendar year as long they are not active simultaneously.
- Deferral Limits: If a SIMPLE IRA plan is replaced by a safe harbor 401(k) plan mid-year, the total elective contributions must not exceed the weighted average of limits for each plan during the transition year.
- First Safe Harbor Notice: The notice required for the transition year must describe the weighted contribution limit—it cannot simply reference the annual limit.