Changing SIMPLE IRA plan custodians
My client owns Company A. They established a SIMPLE IRA 3 years ago with “Dave from US BANK”.
Dave has sucked and wasn’t timely investing their simple contributions for their entire company.
They wish to have us “take over the simple” at Schwab.
If the owner keeps the Company A SIMPLE IRA plan in place, but decides to change advisors/custodians, does that start a new 2 year clock for doing rollovers into the new Schwab Company A SIMPLE IRA accounts, or does the time the accounts were open at US Bank fulfill the 2 year clock for rollovers?
Permalink Submitted by Alan - IRA critic on Tue, 2025-03-04 13:32
The time at the bank counts.
The two year clock only applies to distributions that are not rolled over to another SIMPLE IRA. If the current SIMPLE IRA and those for any employees are directly transferred to Schwab there will not even be a distribution reported. Any rollover of a distribution will be subject to the one rollover limit per 12 months for all IRAs owned by the participant, which is another reason to have Schwab initiate a direct transfer from the bank.
That said, Schwab may but is not required to track the 2 year period started with a prior custodian which could result in any Schwab distribution taken in the first two years at Schwab being reported as an early distribution subject to a 25% penalty (and not eligible for rollover as well). I would try to get Schwab to enter into their system the date of the first SIMPLE contribution at the bank. This will be a different date for each employee.
Permalink Submitted by Jon Steffen on Tue, 2025-03-04 13:58
Thank you for your help Alan.