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Sar-Sep funds


Guest John Atkinson
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Guest John Atkinson

Have been advised by my Sar-Sep agent that I cannot transfer (or roll over) any funds out of the plan into an IRA unless I transfer (or roll over) the full value and that if I did so, I would have to do so into another Sar-Sep if I want to keep the grandfathered rights to future contributions. If this true and if not, please advise why.

Thanx.

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I believe the advice given by the agent is wrong.

A SEP is nothing more than an IRA (controlled by the participant) into which employer contributions are made. SARSEPs differ only in the fact that salary reduction employee contributions are also permitted.

Once the contributions reach the IRA, they are treated just like any other IRA. Since IRAs can be rolled over or transferred, in whole or in part, there is nothing in the law that would prevent you from transferring a portion of your IRA. It may be that the product vendor is preventing the transfer?

Further, future contributions are not dependent on a particular funding vehicle. SEP (and SARSEP) contributions can be made to any IRA of the participants choosing.

Take a look at IRC section 408(k)(4). The employer contributions may not be conditioned on the employee's keeping any part of the contribution into the IRA, nor may the employer prohibit withdrawals from the plan.

Hope this is of some benefit to you. Good luck!

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