Rollovers from SIMPLE IRAs

[Felicia]

Assuming that the employee maintained the SIMPLE account for over 2 years, may an employee rollover his SIMPLE IRA into a ROTH IRA (assuming he meets the AGI requirements)?

If so, how would this work? Is it automatically considered a conversion ROTH?

[Gary Lesser]

Yes. The Roth IRA regulations state: An amount in an individual's SIMPLE IRA can be converted to a Roth IRA on the same terms as a conversion from a traditional IRA, except that an amount distributed from a SIMPLE IRA during the 2-year period described in section 72(t)(6), which begins on the date that the individual first participated in any SIMPLE IRA Plan maintained by the individual's employer, cannot be converted to a Roth IRA. Pursuant to section 408(d)(3)(G), a distribution of an amount from an individual's SIMPLE IRA during this 2-year period is not eligible to be rolled over into an IRA that is not a SIMPLE IRA and thus cannot be a qualified rollover contribution. This 2-year period of section 408(d)(3)(G) applies separately to the contributions of each of an individual's employers maintaining a SIMPLE IRA Plan.

Once an amount in a SEP IRA or SIMPLE IRA has been converted to a Roth IRA, it is treated as a contribution to a Roth IRA for all purposes. Future contributions under the SEP or under the SIMPLE IRA Plan may not be made to the Roth IRA.

[Guest Donaldson]

Since EGTRRA has become effective, does anyone know whether a SIMPLE IRA that has been held longer than 2 years can be transferred to another IRA or eligibile retirement plan. IRC 408(d)(3)(A) and (G) seem to indicate that such transfers and rollovers are permitted. Thank you.