October 19, 2025
The SECURE 2.0 Act brought a wide range of enhancements to retirement plans — and one of the most practical changes for small business owners is the new ability to convert a SIMPLE IRA to a 401(k) mid-year.
Historically, once a SIMPLE IRA was established for a year, employers had to maintain it through year-end. Employers couldn’t terminate it mid-year to adopt another plan — even if they wanted to upgrade to a more robust 401(k). This created administrative and planning challenges for businesses seeking more flexibility or enhanced benefits for employees.
Effective for 2024 and later plan years, SECURE 2.0 changes that. Employers can now terminate a SIMPLE IRA mid-year if they choose to adopt a Safe Harbor 401(k) plan to replace it. This provision aligns retirement plan rules with the evolving needs of small businesses, allowing them to take advantage of higher contribution limits, expanded plan features, and greater investment options without waiting for the next calendar year.
This adjustment represents a necessary modernization of the SIMPLE IRA framework. It offers employers a smoother transition path to more advanced retirement plan options and helps ensure employees’ savings can continue to grow seamlessly under a 401(k) structure.
