PATH Act Brought About SIMPLE IRA Rollover Rule Changes

By Beverly DeVeny, Chief IRA Analyst
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The Protecting Americans from Tax Hikes (PATH) Act of 2015 was signed into law on December 18, 2015. This bill was commonly known as the “Extenders Bill” because it made several favorable tax provisions permanent that had been temporary, some for many years.

Buried way down in the PATH Act was a provision that affected SIMPLE IRAs.

Old Law
Under the old rollover rules for SIMPLE IRAs, there was a two-year waiting period before any funds could be moved from a SIMPLE IRA to any other type of retirement account. In that two-year waiting period, SIMPLE funds could only be moved to other SIMPLE IRAs.

In addition, the rollover rules did not allow a SIMPLE IRA to receive any funds from other retirement plans other than another SIMPLE IRA. For example, you could not roll over your 401(k) funds into your SIMPLE IRA.

New Law
The two-year waiting period remains along with the limitation on moving SIMPLE IRA funds out of a SIMPLE in the two-year waiting period, and the limitation on rolling in any funds other than SIMPLE funds.

What has changed is that after the two-year waiting period is over, a SIMPLE IRA can now receive rollover eligible funds from other types of retirement plans. You can now move IRA fund and employer plan funds into your SIMPLE IRA, once the two-year waiting period is over.

This gives SIMPLE IRA owners the ability to consolidate accounts while they are still working for the employer sponsoring the SIMPLE IRA, they can better manage retirement investments since they can be in one place, and it is easier to calculate required minimum distributions when accounts are consolidated.