Deposited into Wrong IRA
Our firm inadvertently deposited contributions meant for a client’s SIMPLE IRA account into their SEP-IRA account for all of 2023. This client is currently participating in the SIMPLE IRA but has the SEP-IRA from previous income source. Is it possible to correct this error? Our custodian (Schwab) is telling us the only remedy is to withdraw the money from the SEP-IRA as excess contributions and she is unable to make the SIMPLE contributions for 2023. Is there no remedy for an administrative error?
Permalink Submitted by David Mertz on Fri, 2024-02-23 00:30
It makes sense that Schwab would say that the contributions would need to be removed from the SEP IRA as excess contributions. Not sure why Schwab would think that the corrective deposits to the SIMPLE-IRA plan could not be made. See the IRS SIMPLE IRA Plan Fix-It Guide
https://www.irs.gov/retirement-plans/simple-ira-plan-fix-it-guide
Assuming that the SIMPLE-IRA plan was properly established and the salary-deferral election was properly made, it seems that it should be possible to treat the employee salary deferrals as employee elective deferrals not deposited timely. Employer matching contributions would also be corrected by treating them as having been made incorrectly.