My client funds a Traditional non-deductible IRA and a SEP (he has a Schedule C). His new finanancial advisor wants to know if he can combine the two. My thought is if he were going to stop funding the SEP, that he could roll the two together. However, if he is going to continue to put money into both I don't believe it would be correct to roll them together. Even if it is, he woyuld just have to start up a new SEP for his future contributions, correct?
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That's my thought too. SEP & traditional are two different ponies. -
I asked Vanguard about this a couple of years ago, and they said that even though the SEP belongs to me, I can't combine it with a regular IRA unless I'm no longer affiliated with the activity that generated the SEP. (For example, no longer employed by the corp that set it up or no longer in business for myself if it was done as a sole proprietor).
I don't know if that's the final word or even if it's just a Vanguard policy, and I didn't investigate it further, but that was the answer I received."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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TTB, Small Business Edition, page SB6-7, "Can a distribution from a plan in the first column be rolled over into a plan in columns 2 through 11?"
IRA to SEP? Yes
SEP to IRA? Yes
The answer to your question is, yes a SEP can be combined with an IRA by rolling one into the other.
The problem is, if you roll a SEP into an IRA, the SEP is no longer a SEP. Its an IRA, subject to IRA rules.
If you roll an IRA into a SEP, the IRA is no longer an IRA. Its a SEP subject to SEP rules.
To get around this, you can combine the SEP and IRA into one fund, and leave it alone. Then set up a new IRA for the IRA contribution, and a new SEP for the SEP contribution, then later combine these two into one fund. Then do the same the following year, and so on...Comment
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