Employee leasing firm taking over; what are my options for my existing

[Guest CCDB]

My employer (22 employees) has contracted with an employee leasing firm (over 4000 employees), and will begin using the service Jan.1. We have been participating in a SIMPLE IRA with our employer since Aug. 1, 1998. This plan will not be available to us from the employee leasing firm. They will be offering a 401K, but I have not seen any details of this so far. They also mention something about a Section 125 plan, which I've never heard of. Currently I have a Roth IRA. What are my options (and tax consequences thereof) for the SIMPLE IRA should I wish to move the funds? Are there any rollover options available, either into the 401K, Roth IRA, or a new regular IRA?

My concern is more with the tax consequences rather than the fees imposed by the existing plan for withdrawing from the SIMPLE plan.

Carl C.

[Guest Fishchick]

You incur a 25% penalty if you distribute any money from a SIMPLE IRA within the first two years after your first contribution, if you are under the age of 59 1/2. SIMPLE IRA's are only eligible to rollover or transfer to other SIMPLE IRA's during the two year period (regardless of your age). After August 1, 2000, (actually- it's the two year anniversary of your first contribution under the plan if you started after August 1), you could transfer the money to a Traditional IRA, or even convert to a Roth IRA. You won't be able to combine the money with the new 401k, unless recently introduced legislation is passed, and even then, you'll probably still have to wait until the two year period is up.

I hope this helps.

[Guest CCDB]

Helps a lot. What penalty is there if I withdraw any of the Simple funds after 2 years, but before 59 1/2?

Carl C.

[Guest CCDB]

Regarding a conversion to a Roth IRA, what are the tax consequences of this? I'd imagine I would have to declare the EE and ER principal contributed to the SIMPLE as income on my 1040 and pay regular taxes on this, and the appreciation would not be taxed. Am I right?