First, some background: during the first two years after a SIMPLE IRA is established, assets held in the SIMPLE must not be transferred or rolled to another retirement plan. This two-year period begins the first day the employer deposits a contribution to the SIMPLE IRA. After the two-year period, assets in a SIMPLE IRA may be moved to another eligible retirement plan by means of a transfer, a rollover (including a direct rollover) or as a Roth conversion.
Distributions that occur during the two-year period are subjected to an early-distribution penalty of 25% if the SIMPLE IRA owner is under age 59.5 when the distribution occurs. If an exception applies, however, the 25% penalty is waived. Distributions that occur when the SIMPLE IRA holder is age 59.5 or older are not subjected to the early-distribution penalty, even if the distribution occurs within the two-year period.
Regarding your question, I am not aware of any divorce exception to the two-year rule. However, there is good news: the two-year waiting period does not apply to transfers or rollovers between two SIMPLE IRAs.
The employer may allow the spouse receiving the assets to establish a SIMPLE IRA. Usually, all that is required for the spouse to establish the SIMPLE is a copy of the Form 5304-SIMPLE or 5305-SIMPLE that was completed by the employer to establish the SIMPLE IRA and the custodian's SIMPLE IRA adoption agreement. The SIMPLE IRA adoption agreement must be completed by the spouse receiving the assets. The custodian determines whether any written authorization/confirmation from the employer is required to establish the SIMPLE for the spouse. The assets can then be transferred to the SIMPLE established for the spouse.
(For more about transferring IRA assets, check out Getting a Divorce?- Understand the Rule of Dividing Plan Assets, Moving Your Plan Assets? and Receiving an Unexpected Form 1099-R.)
This question was answered by Denise Appleby