IRA

SIMPLE IRA Rollovers: Why? Why Not?

April 11, 2016
By: Chin Kim

My youngest son just turned four years old and is entering the “why dad?” phase. No matter how I address his questions, he will often repeat over and over again, “why?”

 In the same way I handled this particular question with my other children, I started responding back, “why not?” Sometimes it works, and sometimes it backfires as he continues to ask, “why dad?”

The Small Business Job Protection Act of 1996 created SIMPLE IRA plans. Since then, every year the Advanced Marketing Group has consistently received the following question: “Why can’t a person move other retirement money into a SIMPLE IRA?” We often did not have a good answer except to cite the IRS Notice 98-4, Q&A, A-2, which states:

Contributions under a SIMPLE IRA Plan may only be made to a SIMPLE IRA, not to any other type of IRA. A SIMPLE IRA is an individual retirement account described in § 408(a), or an individual retirement annuity described in § 408(b), to which the only contributions that can be made are contributions under a SIMPLE IRA Plan and rollovers or transfers from another SIMPLE IRA.

Fast forward 20 years to last December when the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) included a provision to update this requirement by allowing SIMPLE IRA participants to roll assets from other eligible retirement plans. After the SIMPLE IRA holder has participated in the SIMPLE IRA plan for two years, he or she can now roll funds from prior employers' retirement plans (e.g., SEP-IRA, 401(k), 403(b), and governmental 457(b) plans) or IRAs into his or her SIMPLE IRA.

We are currently waiting on specifics from the IRS, but it appears as if the information directed to taxpayers on the IRA website has not yet been updated.

Stay tuned, and should you have any additional questions, please contact the Advanced Marketing Group at (800) 722-2333, ext. 3939 or send an e-mail to RSG@pacificlife.com

 

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Chin is currently an Assistant Vice President of Regulatory Compliance in the Retirement Solutions Division at Pacific Life. Previously, he led the Retirement Strategies Group, as Assistant Vice President in the Retirement Solutions Division at Pacific Life. His core responsibilities included sharing and supporting retirement strategies concepts through development of marketing materials and tools and leading the team members in the field and in the home office.

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