Transfer SAR SEP to Simple IRA
I have a client who has a grandfathered SAR SEP. He would like to change this to a Simple IRA. Can he do this in the middle of the year? Are there any special procedures needed?
I have a client who has a grandfathered SAR SEP. He would like to change this to a Simple IRA. Can he do this in the middle of the year? Are there any special procedures needed?
Permalink Submitted by Alan Spross on Sat, 2008-04-19 00:02
He can’t do this at all. A SIMPLE IRA can only accept transfers from other SIMPLE IRA plans. Perhaps he can roll it to a traditional IRA.
Permalink Submitted by Martin Helmer on Sat, 2008-04-19 00:36
Another problem is with the SIMPLE’s exclusive plan rule. The SIMPLE can’t exist in the same year that you’ve sponsored another plan, unless no benefit has accrued under that other plan for the year. With a SARSEP I assume there have already been contributions made, unless it’s a 1 person self employed situation. And if it’s a 1 person plan, I wonder if there’s a problem with the SARSEP nondiscrimination test found at Internal Revenue code section 408(k)(6).
Starting a SIMPLE in the same year there’s been a contribution or accrual to another plan would invalidate the SIMPLE. You need to wait till ’09.