Can you terminate a safe harbor 401-k plan effective end of business 12/31/01 and set up a SIMPLE 401-k effective 1/1/02? Is the SIMPLE 401-k considered a "successor plan" or can distributions be made from the safe harbor 401-k?:confused:

Under Reg 1.401(k)-1(d)(3) a successor plan is any DC Plan, other than an ESOP or SEP, that the same employer maintains during the determination period beginning on the date the 401(k) Plan terminates and ending 12 months after final distribution is paid. Since a SIMPLE 401(k) is considered a DC Plan, if it is established according to your message, I would say you have a successor plan in place and old monies cannot be disbursed until another distribution event occurs (i.e-termination of employment, death, etc.)

However, there is a "2%" exception to this rule, but you would need to determine if it applies.