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Transfer of Keogh assets to SEP-IRA


Guest Melissa Winslow
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Guest Melissa Winslow

A sole-pracitioner has a Keogh which is held by an insurance company whose investment return has not been satifactory. The practitioner would like to move the funds to a SEP-IRA that he established some time ago. The insurance company will allow the pracitioner to withdraw 10% of the assets each year with out penalty. I have the following questions regarding this situation. First, is a rollover between the Keogh and SEP-IRA is not permitted unless the Keogh plan is terminated? Second, is the the practitioner permitted to take a partial distribution from the Keogh and invest it in the SEP-IRA? If so, would the distribution from the Keogh be subject to the standard 20% tax withholding and early withdrawl penalty? Can the practitioner even "nickel and dime" away his Keogh assets this way? Where is this addressed in the Code/Regs?

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  • 2 weeks later...

The Keogh must permit the distribution; willy nilluy withdrawals are not allowed (unless an event permitting distribution has occured). Under the Code distributions made on account of the plan's termination may be rolled over. If done as a direct transfer, then the withhoding rules would not apply. If not paid on account of termination the amount received may only be rolled over/transferred if it is not a periodic payment as defined in Code Section 402©. Hope this helps.

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