Owner of 2 businesses with SIMPLE IRAs, can you roll Company A account into Company B account?
I have a client that owns 2 businesses. Company A and Company B.
He started SIMPLE IRAs for both companies 3 years ago, but was only contributing to the Company A SIMPLE IRA.
He pays himself much more at Company B. This year he started a SIMPLE IRA for Company B and has stopped contributing to the Company A SIMPLE IRA.
Can he roll the funds from his Company A SIMPLE IRA into the newly opened Company B SIMPLE IRA without having the account opened for 2 years?
We think he might be able to because as the owner of both companies, he can only contribute $16,500 to either of them, so they’re treated like 1 and the same? Maybe the IRS doesn’t view it that way.
Permalink Submitted by Alan - IRA critic on Tue, 2025-03-04 12:05
There is a significant problem here. Under the employer aggregation rules, there should only have been one SIMPLE IRA to begin with for employees of both companies subject to identical contribution provisions for eligibility and employer contributions. In other words, both companies should have been under one SIMPLE plan. This is clearly stated in both the 5304 and 5305 adoption agreements general instructions.
Proper correction of these errors and likely other errors is determined under EPCRS. I would think this is a “significant operational failure” but the complete picture needs to be assessed before determining whether the failure or other failures are significant or insignificant.
In general, the correction will likely require that the employees of B receive make up contributions back to year 1, and there will be only one SIMPLE IRA plan remaining, most likely the A plan since there are already 3 years of contributions there. A consultant or TPA should be retained to ensure that the corrective actions are appropriate for the situation.
Permalink Submitted by Jon Steffen on Tue, 2025-03-04 14:20
Let me explain more detail, though i’m uncertain if it makes a difference.
Company A is owned 100% by Dale.
Company B is owned 50% by Dale and 50% by Dale’s wife Jill. They do live in Wisconsin, a marital property state.
Were they still supposed to have just 1 Simple for both companies?