SIMPLE IRA 2-year clock
A client was a participant in a SIMPLE IRA for 5-years. They left the firm that sponsored that SIMPLE IRA and joined another firm who sponsored a [i]different [/i]SIMPLE IRA. The client then transferred their SIMPLE IRA assets from the first SIMPLE IRA to the new employer’s SIMPLE IRA.
Would those assets now be bound by a new two-year holding period even tough they had previously met the two-year holding period in the previous employer’s plan?
Thanks!
Permalink Submitted by Alan Spross on Fri, 2010-02-26 18:43
Yes, they now must adhere to the 2 year waiting period for the new employer’s SIMPLE IRA. There is no provision for separately accounting for the rollover assets separately in the new SIMPLE plan. The first SIMPLE IRA assets should have been transferred to a TIRA account.
Permalink Submitted by BruceM on Sat, 2010-02-27 02:19
Alan
So you’re saying that the 2 year holding period needed to avoid the 25% penalty is per IRA custodian, not per employer?
If so, and the employer uses the 5304 SIMPLE (the employee establishes the account with their own custodian), then this would suggest the employee should keep the same custodian…at least for 2 years.
BruceM
Permalink Submitted by Martin Helmer on Sat, 2010-02-27 16:10
The 2 year holding period is per employer. But in this case the assets became part of the new employer plan and lost their status. The old holding period would have applied had the assets gone to a traditional IRA or to a SIMPLE Ira account not part of the new employer’s plan.