Legal subtleties between SEP vs. tIRA vs Rollover IRA

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
damjam
Posts: 947
Joined: Thu Mar 25, 2010 7:46 am
Location: Brooklyn, NY

Legal subtleties between SEP vs. tIRA vs Rollover IRA

Post by damjam » Wed Aug 29, 2018 10:17 am

I manage several tax sheltered accounts:
SEP IRA
traditional IRA
Rollover IRA
Roth IRA

I searched a bit of the forum and apparently there are some legal subtleties between tIRA and a rollover IRA. The differences revolve around the possible ability to rollover funds to a new 401(k), and federal (maybe state as well) protection of assets in case of bankruptcy.
But what about SEP IRAs? Where do they fit in?

I ask because I've been hoping to consolidate accounts and wondering if I have already reach the lower limit. Should I keep the funds separated going forward?

gostars
Posts: 439
Joined: Mon Oct 09, 2017 7:53 pm

Re: Legal subtleties between SEP vs. tIRA vs Rollover IRA

Post by gostars » Thu Aug 30, 2018 2:00 am

As I understand it, from the IRS's perspective, a traditional IRA and a rollover IRA are the same thing. Historically, there was a distinction between them which affected rollovers to other plans, but that distinction was eliminated long ago. Some small percentage of plans still follows the old rules and does not permit incoming rollovers from accounts that aren't straight workplace plans or titled as rollover, but these are very much in the minority and most plans now allow incoming rollovers of any pre-tax money. There may be some states that do not protect IRAs from bankruptcy claims, but most extend them the same protections that are available to other retirement accounts.

I personally would not put too much effort into keeping the money separate. No employer I've worked for since I knew what a 401k was has limited the source of contributions on incoming rollovers, and such limitations are likely one of the easier things to get changed in a plan. Making a bad plan less bad by adding new funds or moving to a new provider takes time and money, but a minor amendment to a document to strike an outdated policy is nothing. Whoever is running the plan is probably happy to bring in all the assets they can get so they can collect extra fees.

User avatar
Earl Lemongrab
Posts: 7270
Joined: Tue Jun 10, 2014 1:14 am

Re: Legal subtleties between SEP vs. tIRA vs Rollover IRA

Post by Earl Lemongrab » Thu Aug 30, 2018 1:53 pm

gostars wrote:
Thu Aug 30, 2018 2:00 am
As I understand it, from the IRS's perspective, a traditional IRA and a rollover IRA are the same thing. Historically, there was a distinction between them which affected rollovers to other plans, but that distinction was eliminated long ago.
Not exactly. Conduit IRAs (official term) have some legal distinction for elderly people, like born before 1935 or something. I'd have to look it up to be sure of the year.

So company plans require an untouched rollover IRA to roll in, but there is no legal reason for that.

Post Reply