SEP IRA Consolidation

Submitted by Colin O on Fri, 2023-06-23 19:29

I run a sole prop. Report under my social. I have 2 SEP IRAs at different institutions. I want to consolidate all my SEP IRAs at a 3rd institution. Are there any issues or problems I’ll run into consolidating these 2 at the new institution? I plan on doing direct transfers, will this avoid any 1 rollover per year rule or tax issues?
Also, are there any issues with SEP Adoption Agreements? I plan to use the adoption agreement of the new institution, but want to make sure transferring won’t trigger any issues with the adoption agreement changing.
Thanks!!



Submitted by Alan - IRA critic on Fri, 2023-06-23 21:50

Consolidating by direct transfers is not a problem. Are you not using a 5305-SEP?

Submitted by David Mertz on Fri, 2023-06-23 21:54

  • There is no problem consolidating these SEP IRAs.  With regard to transfers these are treated like any traditional IRA (other than a SIMPLE IRA within 2 years of establishment of the SIMPLE IRA).
  • A direct trustee-to-trustee transfer avoids the one-rollover-per-year rule because such a transfer is neither a distribution nor a rollover.  It is not reportable.
  • The adoption agreement pertains to making SEP contributions, not to maintaining the SEP IRA.  Still, what would be the benefit of changing the SEP adoption agreement?  The SEP plan adoption agreement is independent of the SEP IRA.

Submitted by Colin O on Fri, 2023-06-23 22:15

Candidly, since it’s a sole prop and im the only employee, I never worried about the adoption agreement. Just calculated the amount I could put into the SEP IRA. I’m realizing that was wrong and I’m establishing the plan going forward. Is there a benefit of the 5305-SEP compared with the prototype plan with the firm? Looks pretty similar. 

Submitted by David Mertz on Sat, 2023-06-24 00:40

To determine any difference you would have to compare the agreements themselves.  I would imagine that there would be some difference since it would make little sense for the preparer of the prototype plan to go to the effort to get approval of a plan that simply mimicked Form 5305-SEP.

Submitted by William Tuttle on Sat, 2023-06-24 02:59

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