Moving SIMPLE IRA funds to another plan (Traditional IRA, Roth IRA, 40

[Guest Carl C]

The company I work for initiated a SIMPLE IRA plan on August 4, 1998. Contributions had been made until January of this year, when an employee leasing firm took over as our employer. While the leasing firm couldn't continue with our existing SIMPLE IRA plan, they did recently start a 401K plan for us.

I have a Traditional IRA, Roth IRA, and the new employee leasing firm 401K plan.

I would like to move the funds from the SIMPLE IRA to any of the other vehicles. Can this be done, and if so, are their any tax consequences on moving the funds to one plan vs. another?

I also heard that moving the SIMPLE IRA funds should be done after a certain date or holding period. Can anyone elaborate?

Carl C.

[R. Butler]

You cannot rollover the funds to another qualified retirement plan. Based on the information you provided your best bet is to probably to just leave it as it is. If you first participated in the plan on 8/4/98, you will be able to treat it as a traditional IRA on 8/4/00.

If you take a direct distribution or attempt to rollover the funds to a traditional or Roth IRA within two years from the time the account was originally established, you will be subject to a 25% penalty.

[Guest Carl C]

R. Butler, thank you for the reply. After the 2 year anniversary date, I would like to roll the funds into my existing traditional IRA, where I have more investment options (stocks, bonds, unlimited universe of mutual funds, etc.). With the present plan provider, I am limited to their mutual funds only.

Can I do this after the anniversary date without incurring an IRS penalty?

Carl C

[R. Butler]

Yes

[Gary Lesser]

You can roll it over (or transfer it) ONLY to another SIMPLE IRA without waiting for the two years to expire (and gain more investment options). There may be fees for selling, liquidating (and so on) existing assets and/or IRA transfer charges to consider. There may be other options if the employer uses a designated financial institution. Many financial institutions have SIMPLE IRA plans. Assuming the employer does not use a DFI any SIMPLE IRA can be used for ongoing contributions. In some cases, although fees, commissions, and charges are higher, a brokerage account can be offered as an investment vehicle as well.