Simple IRA to IRA
Client owns a company and has a Simple IRA that she makes contributions to. She wants a product that will not administrate Simple IRAs, because they are corporate sponsored plans, but will allow for IRAs. Since she is still participating and contributing to the company Simple IRA, may I take some of the balance and roll it over to this new product that she wants into an IRA and still allow her to make contributions to her Simple IRA plan? I realize the Simple IRAs are allowed to be directed by the participant, but since the company won’t allow for Simple IRAs, didn’t know if we could rollover some of her Simple balance to an IRA since she is still working for the company and making contributions.
Thank you in advance for your assistance.
Permalink Submitted by Alan - IRA critic on Sat, 2016-03-05 00:02
SIMPLE IRA balances can be transferred out of the SIMPLE IRA only after 2 years have passed since the first SIMPLE contribution was made. However, even if the two years have passed the transfer must be rolled into an eligible retirement plan to avoid tax and penalty. “New product” must therefore be held in one of these plans to avoid tax and penalty (25%) on the SIMPLE distribution, and client should be sure that they fully understand what the product is and whether it is appropriate to invest in it.