DEADLINE: Switching from a SIMPLE IRA plan to a 401k

So here are the numbers for 2015: If a company currently has a SIMPLE IRA plan, the employee can defer up to $12,500/yr., plus an additional $3,000 if they are over age 50. The employer can choose to make a 2% non-elective contribution (more about this at the IRS website ) or match employee contributions, up to 3% of compensation

SIMPLE IRA Summary: The absolute maximum combined employer and employee contribution is $31,000

In a variation of a 401k plan, you can defer up to $18,000,  plus an additional $6,000 if you are over age 50. Employers can contribute additional funds, such as matching contributions and profit sharing.

401k Summary: The absolute maximum combined employer and employee contribution is $59,000

This can all be fully tax deductible if you wish.

For those that have a SIMPLE IRA plan in place now, and want to switch to a 401k, here are items to consider: 

-You cannot maintain a SIMPLE IRA and 401k in the same calendar year

-Employees must be given notice 60 days in advance of this type of change (November 1 for a January 1 switch)

If you think you may benefit from making this switch for next year, now is the time to do the math. 

2014 Retirement Plan Year End Deadlines

This post is for you if you are the owner of a business,  self-employed, or a decision maker on your company's retirement plan. Now that summer is behind us (according to the work/school calendar), end of the year deadlines are fast approaching. 

DEADLINES

October 1 

-This is the deadline to establish a new  Safe Harbor 401k plan for 2014. The plan must be in effect for 3 months in the first plan year. 

-If you currently have a SIMPLE IRA and want to start a 401k , you must give your employees notice of 60 days(see below). Therefore, you need to handle operational items prior to November 1.

November 1

-If you have SIMPLE IRA plan and you are ending this to start a 401k plan in 2015, you must notify your employees at least 60 days in advance of change.

December 1

-If you already have a 401k plan but want to add a Safe Harbor provision to the plan, proper notices must be delivered to plan participants at least 30 days prior to change

BENEFITS OF STARTING A 401K

-If you are starting a retirement plan for the first time, you may be eligible for a $500 tax credit (available for the first 3 plan years to cover administrative fees)

- 401k plans offer a number of design options to maximize the deferrals for business owners, key employees, or anyone else in the company. 

-In 2014 a participant can put away up to $52,000/year into the plan (plus $5,500 in "catch-up" contributions for those over age 50)