It depends.

If the transaction is processed as a direct rollover to the SEP IRA, then no taxes will be withheld. Through a direct rollover, the assets are made payable to the SEP IRA custodian (or trustee or plan to which the assets are being rolled). If the transaction is processed as an indirect rollover - which means the assets are first distributed to the participant, who must then rollover the assets to the SEP IRA within 60 days - the administrator of the profit-sharing plan will withhold 20% of any portion of the distribution that is rollover eligible.

Check with the SEP IRA custodian to determine their documentation requirements (if any) for processing the direct rollover. The administrator of the profit-sharing plan may also have special documentation that the participant must complete to initiate any distribution, including those processed as a direct rollover to another retirement plan. In addition, some plan administrators require the custodian to provide an acceptance letter verifying the type of account to which the assets will be credited.

Provide the SEP IRA custodian with a copy of the most recent statement issued for the profit-sharing plan and ask that they identify any asset on the statement that cannot be held in their IRAs. If the custodian is able to hold all the assets that are currently being held in the profit-sharing plan, then all the assets may be rolled to the SEP IRA as they are. If the custodian is unable to hold any of the assets, then these cannot be rolled to the SEP IRA, and the participant may need to liquidate these assets to proceed with the rollover to the SEP IRA. Alternatively, the participant may shop around for a custodian that is able to hold all the assets.

This question was answered by Denise Appleby
(Contact Denise)

  1. Can I roll the funds in an SEP-IRA over to a profit-sharing plan or self-directed ...

    Yes. Funds can be rolled over from an SEP IRA to a profit-sharing plan, provided the plan document that governs the profit-sharing ... Read Answer >>
  2. What will happen to my SEP IRA if I leave my current employer?

    Because the funding vehicle for the SEP is a Traditional IRA, the same transfer and rollover rules that apply to a Traditional ... Read Answer >>
Related Articles
  1. Retirement

    Avoid the Most Common IRA Rollover Mistakes

    Avoid paying excess taxes by learning some simple transfer rules.
  2. Retirement

    Avoid Taxes on IRA Rollovers

    For years, IRA owners have been allowed to roll over their money from one IRA to another once a year without penalty, for each IRA account they had. A tax court ruling in January 2014 has brought ...
  3. Financial Advisor

    Why Rollover Your Retirement Assets into an IRA?

    If you're in the workplace now, chances are you'll ask yourself this question eventually: 'Should I rollover to an IRA?' Here's a guide.
  4. Investing

    Avoid These Common IRA Rollover Mistakes

    Rolling over an IRA can lead to higher returns and other perks; but avoid these common mistakes.
  5. Retirement

    SEP IRA Limits in 2016

    Discover the SEP IRA limits for 2016. Included is a summary, plans that would be ideal candidates for SEP IRAs, and contribution and distribution rules.
  6. Financial Advisor

    SEP IRAs Tutorial

    Learn about the set-up, the contributions to and the distributions from this IRA-based plan to which employers may make tax-deductible contributions on behalf of eligible employees.
  7. Retirement

    Wealth-Building IRA Rollovers

    Rollovers allow your tax-deferred retirement assets to grow, even when the world around you is changing.
  8. Retirement

    Business Owners: How To Set Up An SEP IRA

    SEP IRAs are simple to set up and run, making them a popular choice for business owners.
  9. Financial Advisor

    Best Ways to Roll Over Your 401(k)

    When you leave a job, you have some decisions to make about what to do with your 401(k). Here are some choices.
  10. Retirement

    How After-Tax Rollovers Affect Your IRA

    Consolidating retirement assets? Make sure you account for pre-tax and after-tax assets separately.
  1. Rollover IRA

    A special type of traditional individual retirement account into ...
  2. IRA Rollover

    A transfer of funds from a retirement account into a Traditional ...
  3. Rollover

    A rollover is when you do the following: 1. Reinvest funds from ...
  4. Simplified Employee Pension - SEP (Simplified Employee Pension IRA)

    A retirement plan that an employer or self-employed individuals ...
  5. Eligible Rollover Distribution

    A distribution from an IRA, qualified plan, 403(b) plan or 457 ...
  6. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
Hot Definitions
  1. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  2. Federal Debt

    The total amount of money that the United States federal government owes to creditors. The government's creditors include ...
  3. Passive Management

    A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. ...
  4. Series 7

    A general securities registered representative license administered by the Financial Industry Regulatory Authority (FINRA) ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  6. Expatriation Tax

    An expatriation tax is a tax on someone who renounces their citizenship. In the United States, the expatriation tax provisions ...
Trading Center