Terminating a SIMPLE IRA Plan
If you decide your SIMPLE IRA plan no longer suits your business, consult with your financial institution to determine if another type of retirement plan might be a better match.
Other than initial establishment, SIMPLE IRA plans are maintained on a whole-calendar-year basis. Once started for a year, a SIMPLE IRA plan must continue for the entire calendar year and must fund all contributions promised in the employee notice. You can terminate a SIMPLE IRA plan prospectively, beginning with the next calendar year, after you have informed employees that there will be no SIMPLE IRA plan for the upcoming year.
Example: If in 2010 an employer decides to terminate its SIMPLE IRA plan as soon as possible, the employer must inform employees within a reasonable period of time before the 60-day election period ending on December 31, 2010 (November 2), that there will be no SIMPLE IRA plan for 2011. For 2011, the employer can establish and maintain another kind of qualified plan for its employees and, if this other qualified plan is not operative in 2012, re-establish a SIMPLE IRA plan for 2012.
To terminate a SIMPLE IRA plan, notify the SIMPLE IRA financial institution that you will not be making contributions for the next calendar year and that you want to terminate your contract or agreement with that institution. You must also notify your employees by November 2 that you will discontinue the SIMPLE IRA plan.
You do not need to give any notice to the IRS that you have terminated the SIMPLE IRA plan.