EMPLOYERS ALLOWED TO REPLACE SIMPLE RETIREMENT ACCOUNTS WITH SAFE HARBOR 401(k) PLANS DURING A YEAR.

SEC. 332. EMPLOYERS ALLOWED TO REPLACE SIMPLE RETIREMENT ACCOUNTS WITH SAFE HARBOR 401(k) PLANS DURING A YEAR.(a) In General.—Section 408(p) is amended by adding at the end the following new paragraph:“(11) Replacement of simple retirement accounts with safe harbor plans during plan year.—“(A) In general.—Subject to the requirements of this paragraph, an employer may elect (in such form and manner as the Secretary may prescribe) at any time during a year to terminate the qualified salary reduction arrangement under paragraph (2), but only if the employer establishes and maintains (as of the day after the termination date) a safe harbor plan to replace the terminated arrangement. “(B) Combined limits on contributions.—The terminated arrangement and safe harbor plan shall both be treated as violating the requirements of paragraph (2)(A)(ii) or section 401(a)(30) (whichever is applicable) if the aggregate elective contributions of the employee under the terminated arrangement during its last plan year and under the safe harbor plan during its transition year exceed the sum of—“(i) the applicable dollar amount for such arrangement (determined on a full-year basis) under this subsection (after the application of section 414(v)) with respect to the employee for such last plan year multiplied by a fraction equal to the number of days in such plan year divided by 365, and “(ii) the applicable dollar amount (as so determined) under section 402(g)(1) for such safe harbor plan on such elective contributions during the transition year multiplied by a fraction equal to the number of days in such transition year divided by 365. “(C) Transition year.—For purposes of this paragraph, the transition year is the period beginning after the termination date and ending on the last day of the calendar year during which the termination occurs. “(D) Safe harbor plan.—For purposes of this paragraph, the term ‘safe harbor plan’ means a qualified cash or deferred arrangement which meets the requirements of paragraph (11), (12), (13), or (16) of section 401(k).” . (b) Waiver of 2-year Withdrawal Limitation in Case of Plans Converting to 401(k) or 403(b).—(1) In general.—Paragraph (6) of section 72(t) is amended—(A) by striking “accounts.—In the case of” and inserting “accounts.—“(A) In general.—In the case of” , and (B) by adding at the end the following new subparagraph:“(B) Waiver in case of plan conversion to 401(k) or 403(b).—In the case of an employee of an employer which terminates the qualified salary reduction arrangement of the employer under section 408(p) and establishes a qualified cash or deferred arrangement described in section 401(k) or purchases annuity contracts described in 136 STAT. 5368 section 403(b), subparagraph (A) shall not apply to any amount which is paid in a rollover contribution described in section 408(d)(3) into a qualified trust under section 401(k) (but only if such contribution is subsequently subject to the rules of section 401(k)(2)(B)) or an annuity contract described in section 403(b) (but only if such contribution is subsequently subject to the rules of section 403(b)(12)) for the benefit of the employee.” . (2) Conforming amendment.—Subparagraph (G) of section 408(d)(3) is amended by striking “72(t)(6)” and inserting “72(t)(6)(A)”. (c) Effective Date.—The amendments made by this section shall apply to plan years beginning after December 31, 2023.