Small employer has Form 5304 Simple IRA plan and all employee accounts are currently at Edward Jones, because the Edward Jones broker is who the employer originally contacted about starting a Simple IRA plan. That was in February 2014. Employee now wants to transfer their account balance to a new Simple IRA account at TD Ameritrade and wants future contributions to go to the TD Ameritrade Simple IRA. Someone at Edward Jones (either the broker or an admin person) told the employee that “federal law requires that contributions must be made to the original custodian for at least 2 years”.

I believe the person has their 2-year rule confused, since I can’t find any such provision in “federal law” (the IRS guidelines that I checked). To my reading, the employee may either freely make the transfer without account charges or penalties OR they can transfer but might incur an account charge or penalty from the custodian (not the IRS). However, if that is the case, I believe the employer is required to provide annual notification of a 60 day period each year in which the employee CAN transfer without custodial fee or penalty.

Is this correct? If not, could you clarify? Or do I need to ask the employer for a copy of the 5304 plan?