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IRS Updates Guidance on Expansion of SIMPLE IRA Rollover Options

Government Affairs

The IRS has updated the information it provides on the expansion of rollover options, which includes SIMPLE IRA plans.  

The information is contained in an issue snapshot that describes the change made by the Protecting Americans from Tax Hikes Act (PATH) of 2015 to Code Section 408(p) to allow SIMPLE IRAs to accept contributions from other plans under certain circumstances.

The PATH Act expanded the portability of retirement assets by permitting taxpayers to roll over assets from traditional and SEP IRAs, as well as from employer-sponsored retirement plans, such as a 401(k), 403(b) or 457(b) plan, into a SIMPLE IRA plan. 

Restrictions

There are some restrictions to the changes made by the PATH Act: 

  • SIMPLE IRAs cannot accept rollovers from Roth IRAs or designated Roth accounts.
  • The change applies only to rollovers made after the two-year period beginning on the date the participant first participated in their employer’s SIMPLE IRA plan.
  • The new law applies to rollovers from other plans to SIMPLE IRAs made after Dec. 18, 2015, the date the PATH Act was enacted.
  • The one-per-year limitation that applies to IRA-to-IRA rollovers applies to rollovers from a traditional, SIMPLE, or SEP IRA into a SIMPLE IRA.

The IRS also notes that the PATH Act did not change the limitations for payments made from a SIMPLE IRA during the two-year period following initial participation. 

Audit Tips

The IRS offers the following audit tips related to the changes the PATH Act made. 

  • Check the SIMPLE IRA for rollovers from other plans, the date of the rollover, and the age of the SIMPLE IRA account.
  • Rollovers from Roth IRAs are not allowed.
  • The rollover from another type of plan to a SIMPLE IRA must be made after Dec. 18, 2015, the date of enactment.