Simple IRA contributions outside of Plan Sponsor

Submitted by Julie Brangenberg on Mon, 2015-01-26 20:28

I have a client who just started a job with a company that offers a Simple IRA Plan. The client would rather make his Simple Contributions to an account that I manage for him. The Employer said that would be fine. They would fund his contributions separately to his new account with us. Do you know if it is acceptable to do this? I handled the same thing from another client, but was told that since ABC Fund Company administered the Simple Plan doc, the contributions had to go through ABC Fund Company, and then we could use ABC Fund Co’s form to transfer the assets to a Simple account with us. Please advise.



Submitted by Alan - IRA critic on Mon, 2015-01-26 22:58

  • A SIMPLE IRA can be set up by the employer with either a designated financial institution (DFI) requirement or the plan will accept the custodian of the employee’s choice. This client apparently has the latter flexibility, so you should be able to set up the SIMPLE IRA for the client.
  • The other situation involved an exception under which contributions to a DFI restricted SIMPLE IRA can be transferred out after being contributed, but there are conditions that must be met to enable the transfer to the desired SIMPLE IRA after first going into the DFI SIMPLE. It is quite rare that this exception is used because of the red tape.

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