sep IRA funding simple IRA
I have a sep IRA but can not meet my obligation to pay the one employee that becomes eligible in september, 2011 and my cpa advised me to open a simple IRA. Could I open a simple IRA in the same year I have owned a sep IRA? I have to close my sep IRA in order to open a simple IRA . correct? can i fund simple IRA with my assets from SEP IRA? if not what do I do with my sep IRA assets?
Permalink Submitted by Denise Appleby on Sun, 2011-07-10 19:58
[quote=”[email protected]“]I have a sep IRA but can not meet my obligation to pay the one employee that becomes eligible in september, 2011 and my cpa advised me to open a simple IRA. Could I open a simple IRA in the same year I have owned a sep IRA? I have to close my sep IRA in order to open a simple IRA . correct? can i fund simple IRA with my assets from SEP IRA? if not what do I do with my sep IRA assets?[/quote]
Contributions to SEP IRAs are discretionary. As such, if you cannot afford to fund it this year, that is OK- …or you can make contributions of lower amounts, ( contribution limit is zero to 25 % NTE $49,000.
You can establish and fund the SIMPLE this year if you want to, as long as you don’t fund the SEP for this year . You are not required to actually close the SEP account in order to fund the SIMPLE.
You cannot move funds from a SEP to a SIMPLE IRA.
Note: Contributions to a SEP IRA are discretionary. With a SIMPLE, contributions are mandatory if (a) the matching option is chosen and the employee makes salary deferral contributions or (b) the employer chooses the nonelective contribution option.
Permalink Submitted by Denise Appleby on Sun, 2011-07-10 20:00
Also- for an employee that becomes eligible this year, contributions to a SEP IRA might not be required for this year ( depending on what you mean by the employee becoming eligible in September).
Permalink Submitted by Shahpar Naghshineh on Mon, 2011-07-11 15:08
what does employer do with the SEP IRA if they are not funding it and they have openned a simple IRA going forwared?
what are employer’s options with the assets in the SEP IRA?
thank you
Permalink Submitted by Jose Morales on Mon, 2011-07-11 15:52
[quote=”[email protected]“]what does employer do with the SEP IRA if they are not funding it and they have openned a simple IRA going forwared?
what are employer’s options with the assets in the SEP IRA?
thank you[/quote]
Once the SEP contribution has been made into the employee’s accounts it is treated the same as if it was a Traditional IRA contribution made by the employees themselves. The employer has no role or obligation beyond making the contributions in an equitable manner to all eligible employees if they choose to make any contribution at all.
Permalink Submitted by Alan Spross on Mon, 2011-07-11 17:55
If you are not going to fund your SEP IRA or that of the employee, and will adopt a SIMPLE IRA instead, you can either leave your SEP IRA in place or you can roll it over to another TIRA or Roth IRA (conversion). You CANNOT roll it into the SIMPLE IRA.