More rollover options for your SIMPLE IRA

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A Savings Incentive Match Plan for Employees (or SIMPLE IRA) may be a welcome alternative to conventional employer-sponsored plans. SIMPLE IRA plans do not have the startup and operating costs of 401(k) or other workplace plans. Generally, any small business with 100 or fewer employees can sign up for a SIMPLE IRA.

These plans may also be attractive to the employee, with higher contribution limits than other IRA plans, 100% vesting and required employer contributions. Employees may elect to contribute as well.

Of course, comparing any two retirement plans yields differing rules and requirements. This is no different when determining whether a SIMPLE IRA is right for you, especially regarding rollover rules. Adding to this examination is the fact that the rules changed less than a year ago.

Previously, you could only roll assets from a SIMPLE IRA to a SIMPLE IRA. You now have more rollover options.

On December 18, 2015, President Obama signed the Protecting Americans from Tax Hikes (PATH) Act. The PATH Act dramatically affected rollovers to SIMPLE IRAs and is effective for rollover contributions made after that date.
So what has changed? Actually, quite a lot!

SIMPLE IRA rollover optionsPrior to the PATH Act, a SIMPLE IRA plan could only receive rollover assets from another SIMPLE. You could still roll SIMPLE IRA assets to other plans if you chose to do so. But SIMPLE IRA holders could not roll assets both ways.

Thanks to this legislation, you can now roll assets both ways. You can roll over assets from another retirement account like a 401(k), 457 plan or SEP IRA into your SIMPLE. This could be an immediate help for those looking to consolidate accounts to save on fees, simplify retirement paperwork and so on.

The two-year rule still applies, meaning that you have to wait two years from the date of initial participation before becoming eligible to roll over funds. Also, Roth IRA rollovers to SIMPLE IRAs remain off limits. You can still roll assets from a SIMPLE IRA over to a Roth IRA, but you must include that in income since such an act entails pre-tax funds rolling over into a post-tax account.

Want more information on rollovers from or to SIMPLE IRA plans? Click on any of the below links for additional information:

And for more on how a SIMPLE IRA may be right for you, download our eBook, Self-Directed Solutions for Small Business Owners, from our eBook library.

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