First post here. Thanks for all of your work, guys and gals.

Owner/Employer client has three different simple ira accounts with one simple plan. The accounts are with three different
well-known wirehouses. Contributions were made to the first a few years ago, to the second in 2004, and the third in 2006. The client now wishes to establish a solo 401k for 2007 for larger allowable deferrals. The client also wishes to move the 2006 simple account total into the newly established 401k and leave the earlier accounts as they are.

First, may the 2006 simple plan account be moved into the newly established 2007 401k, or will we violate the two-year rule. Am I wrong in thinking that since contributions have been made for several years to the "plan", that the two-year rule does not apply.

Second, may we even HAVE a 401k plan as long as the simple is in place. In other words, since the initial contributions and the simple plan will remain with the company, can we have a 401k plan in place, as long as contributions are not made to the simple plan anymore after 2006?

Any ideas would be greatly appreciated here. This is a bird's nest and I would like to help this client.

Thanks.

The two year period of participation starts when the first contribution under the PLAN is made into a participant's SIMPLE-IRA. [IRC 72(t)(6)] The trustee/custodian may report the amount distributed as being within the two year period (unless it knows the date of thefirst contribution). In such case, the participant may have to explain this to the IRS at some point.

As long as the SIMPLE-IRA plan remains dormant (no cotributions), there is no violation of the exclusive plan rule.

Thanks, Gary!!!