simple ira transfer/rollover

[Guest sheadan]

Can a participant who has had money in simple plan transfer money from simple ira plan to employer qualified plan? or does it have to go to a conduit ira? does the 2 year limit apply to when plan opened or when participant began participating?

[Appleby]

Yes the SIMPLE assets can be moved to a qualified plan, however, not as a transfer – it must be as a rollover. The two-year limit does apply.

[Guest franky]

The funds could be transferred to the employer plan, but the transaction would be reported by the SIMPLE IRA custodian/trustee on Form 1099-R as a nontaxable distribution, using distribution code H in box 7.

[Appleby]

Franky,

The transaction is actually a direct rollover- not a transfer. A transfer is a non-reportable transaction.

[Guest franky]

Appleby,

If you refer to the Form 1099-R instructions, you will see that the description for code H uses "direct rollover" from a QP or TSA to an eligible plan other than a traditional IRA. It goes on to say that code H should be used for a distribution from a "conduit" (obviously pre-EGTRRA language) IRA and it is made payable to the trustee of or is transferred to an employer plan. While I agree that we have traditionally thought of "transfer" as a nonreportable event, I do not believe that is the IRS's position. For example, notice in the final Roth IRA regs, where it talks about recharacterizations, it says that the recharacterization can be accomplished by a trustee-to-trustee transfer, yet we know that recharacterizations are always reportable. Well, at any rate, I know we are talking semantics here, and the bottom line is that the transaction can be done.

[pmacduff]

I don't think the answers here have been accurate. Simple IRA plan monies can only go to other Simple IRAs or a regular IRA not a Qualifed Plan. That would be the "work around" (roll to regular IRA and THEN to the Qualifed Plan) however I don't know how that would be viewed in an audit. Simple 401(k) monies can be rolled directly to a Qualifed Plan. Anyone else care to agree or disagree?

[Appleby]

…Franky we need to be careful when relaying information to lay people- you will find that in the retirement business, customers take these terms literally and by definition, a transfer is a non-reportable transaction as opposed to a distribution/rollover which is reportable. The context that you cite merely use the term transfer to mean reassigning … but we will agree to leave it at talking semantics .

pmacduff- you are confusing SIMPLE IRAs with qualified plans. The answers are correct.

[pmacduff]

Appleby - I don't think I'm confused...I was referring to the original thread, "Can a participant who has had money in simple plan transfer money from simple ira plan to employer qualified plan? or does it have to go to a conduit ira?" and I am saying that the Simple IRA $ cannot go directly to a Qualified Plan.

[Appleby]

I know what you are saying pmacduff.

And we are saying that yes- it can be done.

Remember that the SIMPLE and traditional IRAs operate under the same distribution and transfer rules – with the exception of the two-year waiting period that applies to the SIMPLE IRA.

The rule to which you refer applies only to qualified plans, 403(B) plans and 457 plans.

[Guest franky]

pmacduff, I think what you are thinking is the rule that allows SIMPLE IRA plans to receive ONLY SIMPLE IRA funds, including rollovers and transfers from other SIMPLE IRAs. However, there is no restriction on moving SIMPLE IRA monies TO other plans after the initial two-year period.

[pmacduff]

Thank you Franky & Appleby for setting me straight - I did look up the info and am sorry to have spoken up incorrectly out of turn - I'm a QPA & QKA and should know better and usually like to think I keep up on everything! I follow everything now!