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SMALL BUSINESS
JULY 1, 2019

What are the rules for rolling over a SEP IRA?

Answered by
Judith Anderson
Senior Vice President, Retirement & Personal Wealth Solutions at Bank of America
A SEP (Simplified Employee Pension) IRA is a form of IRA designed to help small business owners and their employees save for retirement. The rules for rolling over or transferring funds are the same as for a Traditional IRA. You can move funds to or from a SEP IRA into or from a Traditional IRA or other pre-tax plan like a 401(k) or 403(b) without incurring taxes or penalties.
SEP IRA rollover options

Which accounts can be rolled over to a SEP IRA?

Which accounts can I roll my SEP IRA over to?

  • Traditional IRA
  • SIMPLE IRA (after two years)
  • A different SEP IRA
  • Governmental 457(b)
  • Qualified pre-tax plan, such as a 401(k)
  • Pre-tax 403(b)
  • Roth IRA
  • Traditional IRA
  • SIMPLE IRA (after two years)
  • A different SEP IRA
  • Governmental 457(b)
  • Qualified pre-tax plan, such as a 401(k)
  • Pre-tax 403(b)

Possible reasons to roll into or roll over your SEP IRA:

"You can move funds to or from a SEP IRA into or from a Traditional IRA or other pre-tax plan like a 401(k) or 403(b) without incurring taxes or penalties."
— Judith Anderson, Senior Vice President, Retirement & Personal Wealth Solutions at Bank of America
  • You have stopped working for a company and are now self-employed/sole proprietor, and you want to roll over the assets from your former employer's plan.
  • You'd like to consolidate retirement accounts to gain more control over your investments and minimize administrative tasks and paperwork.
  • You prefer the fee structure, investment choices and services offered by one SEP IRA provider compared with another.

Making it happen:

You have three options for moving money from one account to another:
  • Direct rollover: The administrator of your retirement plan makes a payment directly to the new IRA or retirement plan, with no taxes withheld.
  • Trustee-to-trustee transfer: Funds are moved directly from one IRA account to another IRA account or retirement plan, with no taxes withheld.
  • 60-day rollover: The distribution is paid directly to you. If you deposit the funds into a new IRA or retirement plan within 60 days, there's no tax imposed. However, taxes will be withheld from the distribution, which means you'll need to tap other funds if you intend to roll over the full amount. If you don't meet that 60-day window, you may owe income tax on the funds, and, if you're under age 59½, a 10% additional federal tax on early withdrawals.
Note that the IRS limits rollovers from one of your IRAs to another IRA (or the same IRA) to one every 12 months, but does not limit trustee-to-trustee transfers between IRAs.

Is it possible to roll over or transfer a portion of a SEP IRA?

Yes, you can elect to move a portion of your SEP IRA savings into a separate IRA or eligible retirement plan. This process works in much the same way as a full rollover or transfer.

What about moving money from a SEP IRA into a Roth IRA?

Generally, money in a Roth IRA has been taxed, but your SEP IRA contributions have not. In order to move money from a SEP IRA into a Roth IRA, you will have to pay income tax on the amount you transfer.
If you're considering moving from a SEP IRA to a Roth IRA, pause to consider all of the tax implications. This Roth IRA conversion calculator can be a helpful guide as you make your decision.
Also note that you can't roll funds over from a Roth IRA to a SEP IRA.
For more information on making contributions to your IRA, have a look at IRS Publication 590-A.
If you have rollover questions for other kinds of accounts, check out this handy IRS rollover chart.
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