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SEP > SIMPLE - Can new contributions be comingled?


Guest A. Rostosky
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No- All contributions to a SIMPLE IRA must be made to a SIMPLE IRA plan. Ber in mind that an employer who maintained a SEP or any other plan for any part of this year cannot establish a SIMPLE IRA for this year- unless the SIMPLE is being established for the benefit of a special gruop of employeees based on a collective bargaining agreement

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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As long as the employer executes the SIMPLE IRA Form 5305 SA, I don't see why the contributions could not be made the existing IRA's that employees set up for the SEP Plan. An IRA is an IRA. The bank sponsoring the IRA may have a special item it entitles "SEP IRA", but since a SEP IRA's already permit contrbutions in excess of $2,000 annually, it will, in theory at least, work.

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NO, NO , NO Thornton,

The IRS is very clear on this. All SIMPLE IRA contributions must be made to a SIMPLE IRA.

This is very different from a SEP IRA, where SEP contributions can be made to a regular traditional IRA

Refer to IRS Notice 98-4.

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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  • 2 weeks later...

I now agree. Publication 590, page 54 also makes it clear that a SIMPLE IRA must receive SIMPLE IRA contributions. Thanks for clearing that up. From now on I think I'll stick to qualified plans which I understand. LOL.

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  • 2 months later...

I have another twist to this scenario. An employer terminates a qualified plan and starts a SIMPLE. All this is done properly, the plans do not exist at the same time. Can the distributions from the qualified plan be rolled/transferred into the SIMPLE IRA, or must a separate regular IRA be set up?

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According to Notice 98-4, no other assets can be transferred, rolled, or transferred to a SIMPLE, except SIMPLE IRA assets, such as SIMPLE IRA contributions, or transfers or rollovers from another SIMPLE IRA.

Therefore, the qualified plan assets cannot be rolled to the SIMPLE IRA. The participant must establish a traditional IRA to receive the contribution

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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