Rollover from Money Purchase Plan to Sep IRA
I am currently the sole owner of an S corporation which provides me with a coprorate contribution each year to a money purchase plan. These plans are becoming more expensive each year and I am considering closing the plan and establishing an SEP-IRA account for the corporation. We employ only myself at this time and anticipate that if we add any employees I would want them to also participate in the SEP-IRA in the future. My question is whether there are any problems closing a Money Purchase Plan and rolling over those assets into a SEP-IRA? Also, if the Corporation makes a contribution to the SEP-IRA for me as an emloyee, am I still eligible to contribute to my own individual IRA? Thank you for your assistance.
Permalink Submitted by mk foss on Tue, 2010-02-02 04:58
You can terminate a Money Purchase Plan and roll the funds to an IRA. You don’t have to roll to a SEP IRA in order to establish one for your business. In order to termiante the previous plan, you must file a final 5500-EZ – even if you’ve never been required to file one before. Also your plan must be up-to-date – that means that you’ve adopted all of the changes that have been required based on legislation in the last few years.
You can contribute to the SEP as the employer. As an employee, you can also contribute to an IRA and deduct it – need not be the SEP – if you’re income is low enough when covered by an employer plan. If you adopt the SEP you will need to cover other employees when they become eligible. When completing the SEP paperwork, you have a small amount of leeway in determining when they’re eligible for coverage.