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Sarsep Rollover To Qualified Plan


Guest SCUDDESLER
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Guest SCUDDESLER

We have heard that a qualified plan distribution may not be rolled into an IRA that was established to hold assets contributed through a SARSEP (and vise versa). One of our clients would like to terminate its SARSEP (simply by ceasing to make future contributions to the IRAs) and roll the SARSEP assets (held in IRAs) into a newly-established qualified retirement plan (a defined contribution plan). The bank currently sponsoring the SARSEP (and holding the IRAs) claims that such a rollover is not authorized by EGTRRA's liberalized rollover rules. Is the bank's opinion correct? We think the bank is wrong and that such a rollover (from an IRA initially established to hold SARSEP contributions to a qualified retirement plan) is permissible. Your thoughts are appreciated!

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the bank is wrong. In 2002 you can roll sarsep $ into a qualified plan; you can roll just about any type of IRA into a qualified plan with the new EGTRRA rules. (simple IRA's are a little more strict). You could always roll qualified plan $ into a sep anyways, because its an IRA account.

I suppose if the plan document hasn't be amended for EGTRRA you'd have a problem, or if the qualified plan dosen't allow for rollovers. Both of these options are easily added by plan amendments.

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  • 2 weeks later...

Do note that elective contributions for the current year may not be rolled over prior to the date a notice is provided to the employees that the ADP test has been satisfied or March 15 of the following year.

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... and that the rollover must not include amounts representing RMDs, non-deductible amounts, and amounts representing excess IRA contributions

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

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... and the qualified plan must also allow for such rollovers and specifically state that the plan types that it accepts rollovers from; in this case, a "traditional IRA". Note, too, that unlike a SEP or SARSEP IRA, a SIMPLE IRA is not treated as a "traditional IRA" and must be separately stated for this purpose.

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