IRA Rollover SEPP to new 401(k) plan
L1: IRA Rollover SEPP to new 401(k) planCan I transfer my IRA rollover that has an active SEPP plan to my new company’s 401(k) plan if I continue to take the required distribution?
Tom2012-07-29 18:17, By: Tom Fleck, IP: [188.8.131.52]
L2: IRA Rollover SEPP to new 401(k) planCan you? Yes, you can do anything.
Should you? I wouldn’t.
Read Rev.Rul. 2002-62 Section 2.02(e).
(e) Changes to account balance. Under all three methods, substantially equal periodic payments are calculated with respect to an account balance as of the first valuation date selected in paragraph (d) above. Thus, a modification to the series of payments will occur if, after such date, there is (i) any addition to the account balance other than gains or losses, (ii) any nontaxable transfer of a portion of the account balance to another retirement plan, or (iii) a rollover by the taxpayer of the amount received resulting in such amount not being taxable.2012-07-29 19:09, By: Gfw, IP: [184.108.40.206]
L3: IRA Rollover SEPP to new 401(k) planThanks for confirming my understanding GFW.2012-07-29 19:26, By: Tom Fleck, IP: [220.127.116.11]
L4: IRA Rollover SEPP to new 401(k) planTom,
Click on “Articles” above and then on “Changes to Account Balance” in the listing of articles.
While this article is 8 years old, you can see that one illustration there deals with your question, ie rolling an IRA subject to an active SEPP into a 401k or other employer plan. However, you intended to continue your distributions from the 401k rather than using the rollover to stop the distributions thereby altering the taxability of your distributions. The article emphasizes altering the taxation of the plan, but there are other issues beside this that are a concern. The IRS has since busted some plans for doing a partial transfer of an IRA to another IRA, ie a “portion” of the plan. But you are not proposing to do that either since your question dealt with a total transfer of the IRA balance to the 401k. So you are not planning on altering the taxability of your distributions OR doing a partial transfer.
However, you would be rolling the IRA to a current 401k plan that will be receiving new contributions and may well not allow you to take in service distributions at all prior to 59.5. Either situation would bust your plan, and even if you stopped contributing to the 401k, the account may already have abalance when you did the rollover.
Therefore, in addition to the concerns outlined in the article, it would be extremely risky to transfer your plan into a 401k account, since a 401k is a different type of retirement plan from an IRA.
Even if you start a SEPP with a FORMER 401k account, we do not recommend it because plans do not provide support for SEPPs, plans can impose blackouts, and itwould not bepossible to correct any errors by doing rollovers back into the plan.
In summary, I agree with gfw’s advice and your conclusion.
2012-07-30 00:00, By: Alan S., IP: [18.104.22.168]