SIMPLE IRA 5305

Submitted by Michael S on Mon, 2018-11-19 14:31

I have a Simple IRA and filled out a 5305 years ago. I would like to move the money (currently with Fidelity as a custodian) to another advisor who uses TD Ameritrade as a custodian. Can I fill out a 5304 for my company now to allow this to happen? Or how can I change custodians? Is there a way to change custodians for only my account? So the rest of the my employees don’t have to? I’m confused with this process.



Submitted by Alan - IRA critic on Mon, 2018-11-19 16:12

  • SInce you have apparently met the 2 year waiting requirement, you can transfer your SIMPLE IRA balance to a traditional IRA as often as you wish. There is no requirement for you to keep your balance in a SIMPLE IRA. Your exmployees could do the same if they want to. However, the initial contributions must be made into your SIMPLE IRA, so it becomes a matter of how often you want to transfer the balance out. Since only one 60 day rollover is permitted, all these transfers must be done by direct trustee to trustee transfer.
  • Now if you want to either change the current designated financial institution to another OR to change over to a 5304, you can only do that for each annual notification period. But since you must provide the annual notification by 11/2 you have missed the cutoff for 2019, and will have to wait another year to do that if you wish. If you do this next year for 2020, then employees can use any SIMPLE IRA custodian they choose including keeping the current one. Of course, you will have more administrative work if the employees decide to go with many different custodians at that time.
  • If you have any employees who have NOT met the 2 year holding period, they can still move balances periodically, but must move them to another SIMPLE IRA until they meet the 2 year requirement. They would set up a transfer SIMPLE IRA with another institution, but this can become a hassle and only attractive to those employees who are detail oriented and do not like the current institution’s offerings or expenses.
  • To summarize, if no one else is unhappy, it will be easier for just you to make your own transfers to a TIRA (not a SIMPLE IRA) as often as you wish. That does not involve any new notifications, just your own decision on how often to do your transfers out of your SIMPLE IRA.

Submitted by William Tuttle on Mon, 2018-11-19 17:20

  • We usually see these kind of threads when the current DFI has loads, high expense ratios and/or high wrap fees.
  • Fidelity has some of the lowest expense ratio index funds. No investment  minimums for many funds and recently removed any administrativee fees on SIMPLE IRA accounts.
  • What is so great about TD Ameritrade now, that makes you want to move, that you can’t do at Fidelity.
  • Most of the 5305-SIMPLE participants I know would die for Fidelity as a DFI.

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