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Rollovers to SEP


Guest Thornton
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Guest Thornton

A self-employed individual started an IRA when he was young, went to a SEP as his practice grew and finally set up MPP and p/s plans. Things are slowing down now, and he would like to consolidate everything into a single plan, the SEP. I assume that the IRA can be rolled into the SEP. I can find nothing that prevents the qualified plans from being terminated and the proceeds rolled into the SEP. However, the client has been advised by another consultant that rollovers from the qualified plans to SEP's are not permitted. The client is not concerned about losing the ability to re-roll back to a qualified plan. Am I missing something?

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This is another one of those times when what the law allows and what financial institutions' systems allow may be 2 different things. The general rule is that the end result of a SEP is an IRA and that Profit Sharing and Money Purchase money may be rolled from the terminated plans to the IRA which also contains the SEP contributions. As you already pointed out, the rollovers would not be eligible to be rolled back into another qualified plan in the future but there is no legal requirement that rollovers go into conduit IRAs. However, with that being said, let me point out that the systems of some organizations are not set up to lump SEP IRAs and traditional IRAs together. So, if the client wants a single IRA for simplicity and the financial organization is saying no, you might want to consider changing financial organizations to one which can correctly report SEP contributions, individual contributions and rollover contributions all to a single IRA.

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