SEP IRA versus TIRA….
We have a client that is looking to rollover a former 401k and at this time the only IRA account she has is a SEP IRA. We at this point are looking to rollover these funds into the existing SEP IRA. Are there advantages or disadvantages to this?
Permalink Submitted by Alan Spross on Tue, 2012-09-11 21:28
It can be done. The only advantage is consolidation of IRA accounts.
Under the federal bankruptcy act, a SEP IRA is protected without limit and so are rollover IRAs. Therefore, such a rollover would still result in the SEP account having unlimited protection under the bankruptcy act if the state does not fully protect IRAs.
Since a SEP IRA can only accept pre tax contributions, this consolidation should not compromise the ability to roll the entire IRA into a future employer plan such as a 401k. However, there could possibly be some cases where such a rollover would not be accepted by the plan when it would be if kept in a rollover TIRA.