Fisher\SMB
Connect with us: (888) 674-4504
Home / How to Upgrade Your SIMPLE IRA to a 401(k) Plan
Article Plan Features

How to Upgrade Your SIMPLE IRA to a 401(k) Plan

Upgrading from a SIMPLE IRA to a 401(k) is now easier than ever. Learn how to switch anytime during the year and unlock more savings, flexibility, and features for your business and employees.
By Fisher\SMB Editorial Staff — August 19, 2025
Time to read 3 Minutes

If you’re a business owner with a SIMPLE IRA, you might be feeling the limits of your plan—lower contribution caps, no Roth option, no loan access, and required employer contributions. Good news: upgrading to a 401(k) is easier than ever—and it could be a game-changer for your business and your team.

Thanks to a 2024 update to federal laws like SECURE 2.0, you can now switch from a SIMPLE IRA to a 401(k) anytime during the year. Here’s how to make the move—and why it’s worth it.

Why Upgrade?

Upgrading your 401(k) plan isn’t just about staying compliant—it’s about unlocking new features that can drive better outcomes for both your business and your employees.

With a 401(k) you can unlock:

  • Higher contribution limits
    • The Simple IRA contribution limit for 2025 is $16,500 compared to the 401(k) contribution limit of $23,500. These numbers are even higher for those over 50 years of age.
  • Optional Roth and loan features
    • Similarly, Roth accounts under a 401(k) offer greater contribution limits to participants. Plus, with a 401(k), you can decide whether you want to offer loans as part of your plan, allowing employees to borrow against their vested savings amount in times of need.
  • More flexibility for employers
    • You can add plan features like a profit sharing plan or a cash balance plan to reduce your tax burden while turbo-charging your and employees’ retirement accounts.
  • Better tools to help employees save
    • There are also plan features you can use to help employees save, including auto-enrollment and auto-escalation, which would enroll eligible employees into the plan and increase their contribution rate each year.

Step-by-Step: How to Make the Switch

Step 1: 

Partner with a trusted advisor to help you terminate your SIMPLE IRA and set up the right 401(k) plan.

Step 2: 

Notify your employees about the change and the date the SIMPLE IRA will end. 

(Fisher\SMB can helps with this.)
 

Step 3:

Let your SIMPLE IRA provider and payroll team know about the termination and effective date. 

(*Fisher\SMB helps with this too.)


*Learn how Fisher\SMB can help you streamline your payroll process.

Top 5 FAQs About SIMPLE IRA to 401(k) Conversions

  • Is there a deadline to switch?
    • Nope! As part of an update to Secure 2.0 in 2024, you can upgrade your plan anytime during the year.
    • Stay up to date on new laws impacting your retirement plan with our New Laws Checklist.
  • Where can I learn more about terminating a SIMPLE IRA?
    • Check out the IRS SIMPLE IRA termination guide.
  • What happens to the assets in the SIMPLE IRA?
    • Once the plan ends, the accounts become IRAs. Employees with SIMPLE IRA accounts open for 2+ years can roll them into the new 401(k) right away. 
  • What if the account is less than 2 years old?
    • Those accounts must wait until they hit the 2-year mark before rolling over. Fisher\SMB helps with this by tracking the accounts and proactively reaching out to assist participants once they achieve their 2-year mark.
  • Do employees have to roll over their funds?
    • Nope! It’s totally optional. Participant can elect to leave their funds in their IRA account; it’s totally up to them!

Ready to Upgrade?

Fisher\SMB makes it easy to convert your SIMPLE IRA into a flexible, affordable 401(k) plan that grows with your business. Contact us to get help upgrading your company’s SIMPLE IRA to a 401(k).