Simple IRA Transfer
Hello,
For someone who owns a Simple IRA through a small business, and plans on transferring this into a Traditional IRA (via a Direct Rollover/trustee-to-trustee transfer; in place for way more than 2 years), since the Simple IRA is technically not a qualified retirement plan (like a 401k or an ERISA-based plan), is this still considered a ‘Direct Rollover ala a 401k Plan be transferred into a Rollover IRA?’
Thanks.
Jason
Permalink Submitted by Alan - IRA critic on Mon, 2015-03-16 20:11
It is not a direct rollover because an IRA is on each end. It is a direct trustee to trustee transfer and is not reportable as long as it occurs after the 2 year holding period.
Permalink Submitted by Jason Hochstadt on Mon, 2015-03-16 21:26
Hi Alan, Thanks for your reply. But is the new account classified as a ‘Rollover IRA’ or simply a ‘Traditional IRA’ (assume it’s transferred on a trustee-to-trustee basis; if this were a 401k it would be considered a ‘Rollover IRA’, for example)?Thanks.
Permalink Submitted by Alan - IRA critic on Mon, 2015-03-16 22:20
The new account would not be a rollover IRA because it was not funded by a qualified plan, but rather by an IRA. Not being a rollover IRA may have implications with respect to creditor protection in states that do not fully protect IRA accounts from creditors and depend on the federal bankruptcy Act instead. Under the Act, a rollover IRA, SEP, or SIMPLE IRA have unlimited dollar protection limits in bankruptcy. The rollover from the SIMPLE to a traditional IRA in those states would subject those assets to the 1.245mm dollar limit in bankruptcy rather than not having any dollar limit.